Asian Development Bank (ADB) chief economist Albert Park was in the capital for the Kautilya Economic Conclave. In an interview he said TOI that the agency is closely monitoring global crude oil prices to assess the impact of the escalating conflict in West Asia on the region and advocated that trade and investment channels remain open. samples:
How do you see the development in India in the last three-four years? Is there a sense of complacency about the economy?
The government is very focused on development and growth and tries to understand the costs and benefits of different economic policies in a pragmatic way. Pragmatism is paying off as we see significant government investment in infrastructure, efforts to reduce the regulatory burden on businesses and improved ease of doing business. The aim is to encourage economic activity, increase productivity, encourage more investment and create more jobs.
Is there a need to work to accelerate growth and what should be done, given that jobs are the main concern?
Our forecast is for India to grow at 7% this year and 7.2% next year. This is the highest growth for any economy in Asia. It may be possible to grow faster, but the main thing is not to focus on some number, just keep thinking about how the basic business environment can be improved. All fundamentals are good, India is enjoying a demographic dividend and there is a lot of positive sentiment among consumers and investors.
Employment is an important issue. The good thing is that poverty and inequality have decreased. If you try to create more jobs for less skilled sectors, then you will have to support more labour-intensive production and sectors in which you have a comparative advantage. The success of Tamil Nadu and Gujarat is the right way and we should think about how more states can do it.
Is it possible to create the same number of jobs as before with higher mechanization and digitization?
There may be some truth in that, but I’m not sure if it affects our strategy, labor intensive sectors still create a lot of jobs. Although employment opportunities in manufacturing have a lower ceiling than in the past, opportunities in the service sector have increased as digitalization makes trade in services much more feasible. India has benefited from this… the only concern is that they tend to require more skill. India must push on all fronts. There are many synergies between manufacturing and services.
There are concerns that excess capacity could make its way to the rest of the world, given that there are concerns about giving subsidies?
There is no rule about how much you should produce in a global economy. If you think this reflects unfair trade practices, we have the WTO principles to guide us as to what justifies a countervailing or anti-dumping duty. States, rather than politicizing trade, should adhere to these principles and do their due diligence and enforce what is appropriate.
Do you see a change due to China plus one strategy, including towards India?
We have seen changes in FDI and trade flows. The countries that gain the most are also those that are very competitive producers. Countries with a good investment environment have benefited, Vietnam, India, to some extent, Mexico due to proximity to the US. India and Indonesia also benefit from being large markets. This is an opportunity, especially if it gives a foothold in new sectors, semiconductor circuits, everything related to the green transition. For India to maximize returns, it needs to provide a very attractive investment environment that can be improved over time. Giving subsidies alone will not be sustainable.
India has put checks on investments from countries with which it shares land borders, a move aimed at China, citing security concerns. There are suggestions that easing investment could help reduce the trade deficit. How do you see it?
Security is a non-economic factor and governments must determine their priorities. From an economic point of view, you should minimize the restrictions. I wish the US and the EU would also adopt the view that if the trade balance is not good, allow Chinese firms to invest and produce. This creates more local employment and technology transfer.
