Chief Economic Adviser Arvind Subramanian on Tuesday said that if the Western economies become more protectionist, it can have a “big impact” on the domestic economy.
Calling 2016 as a watershed year for advanced economies, he said, “Year 2016 will go down in history as the moment when the advanced economies—Europe and America—actually decided to change their model of development and how they run economy by becoming more inward-looking, retreating from open markets and globalisation.”
“If the world becomes more protectionist...it’s going to have a big impact on the Indian economy. If the world was to become protectionist, our exports cannot grow at 25 per cent, which means our growth will suffer quite a bit,” Subramanian said while delivering the Hormis Memorial Lecture organised by Federal Bank here this evening.
Subramanian suggested that India should follow in China’s footsteps to advocate open markets.
“Since we’ve a stake in ensuring that other countries remain open, we need to be more proactive in becoming champions of keeping world markets more open. If something happens on H1-B visas, we should be out there mobilising coalitions internationally and maybe, even taking negotiations proactively to ensure that world markets remain open.
“That in turn requires that we are willing to open our markets. In the old days, we were considered a poor country, a small country which didn’t matter. We could say ‘you open your markets, I will do whatever I want’. Those days are long gone because we’ve become big, we’ve become important,” he said.
On championing open markets, he said China has been playing its role quite well and India also needs to do something similar.
“We need to mobilise a coalition of middle income countries....We need to become champions of open markets internationally and that’s something the Chinese are doing very seriously. At Davos, President Xi Jinping went and said ‘we the Chinese are now going to take leadership of the international trading system if Europe and US can’t do so.’ I think we need to do something similar as well,” he said.
The CEA also said that it was a “big surprise” that votes are sought in our country for building highways but not for health and education infrastructure. He hoped this changes.
On Universal Basic Income, he said India can afford it only if a few of the existing welfare programmes are phased out. On demonetisation, he said that for it to succeed, the cash-to-GDP ratio of more than 12 per cent should come down over time.