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ET GBS: Stick with reforms and keep pace, says Nouriel Roubini |
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NEW DELHI: Upbeat about India's growth prospects at a time when other economies have slowed, Niti Aayog vice-chairman Arvind Panagariya said the country has to persist with policy changes as it accelerates to perhaps touch a doubledigit pace of expansion.
"I am optimistic that even though the global economy is not doing well, the scope for India to expand is quite considerable as long as we actually stay on the reform path and do things the right way," Panagariya said at the Airtel-Economic Times Global Business Summit on Saturday.
"We have all reason to expect to even touch double-digit growth in the next two-three years."
Economist Nouriel Roubini, who was sharing the stage with Panagariya, agreed that the government was moving in the right direction as far as reforms are concerned but cautioned that the pace needs to be hastened.
"India must continue with its reforms and as long as this is done there are prospects for India to grow much higher than 7-8% but that is conditional on accelerating the pace of reforms," Roubini said.
He was all praise for the Narendra Modi government but warned of global headwinds with a slowdown in China and some emerging markets.
"India has still managed 7% growth but there are some concerns which need to be addressed," he said.
"My assessment is that first derivative of reform is in the right direction but may be the second derivative of reform is not accelerating as the government is finding it difficult to implement some of the reforms like GST (goods and services tax), which has been stalled because of lack of majority in the Upper House."
In 2004, Roubini had been pessimistic about India and had said it may be as vulnerable to a financial crisis as some other economies that have experienced turmoil.
Panagariya and Roubini were upbeat about India's growth story but feel the dip in merchandise exports is an area of concern.
"Global growth has been slowing down, something that impacts every country and not just India, thereby resulting in a decline in exports. Not only this, in China there is massive excess capacity that puts pressure on India as India cannot export to other developing economies," Roubini said.
According to Panagariya, the key reason for the 15% decline in India's exports is that the currency has actually appreciated against others. "China factor is clearly an important one because of lots of excess capacity. India is not able to export against China to third markets," Panagariya said.
India's merchandise exports declined 14.75% in December to $22.3 billion while cumulative dip between April and December was 18.1% to $196.6 billion against $239.9 billion in the year-ago period.
However, the two economists felt that rising labour costs in China will open up opportunities for India to attract long-term investment.
"China is moving up the valueadded chain and some of the labour-intensive sectors and lowvalue-added production is becoming expensive. There is a lot that can be moved to India because of low labour costs and very large domestic market here, which is one of the major benefits," Roubini said. However, he pointed out that many companies looking at India are worried about tax reforms and infrastructure development.
Though confident about Prime Minister Narendra Modi's vision and leadership skills, Roubini feels that the cost of acquiring land and labour reforms are areas that need to be addressed for improving ease of doing business. "It is more likely that reforms are going to happen at state level with competition among states to attract FDI (foreign direct investment)," Roubini said.
This wasn't much of a concern for Panagariya, who said some states have already taken a lead in bringing about labour reform as well as changes in land acquisition rules.
The Prime Minister is pushing hard on improving ease of doing business, he said. Labour reforms have taken place in Madhya Pradesh, Gujarat and Andhra Pradesh while there is some progress on this in Tamil Nadu. "Hence, we are moving ahead with reforms," he said.
Source : economictimes.indiatimes.com
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