Countries that maintain more openness will grow more: Anne Krueger

The position of any country, including India, will depend on what they do and how they react to geopolitical uncertainties

India should continue to be an open economy and forge regional ties while pushing the pedal on reforms further, says Anne Krueger, senior fellow at the School of Advanced International Studies, Johns Hopkins University. In a face-to-face conversation with Ruchika Chitravanshi on the sidelines of the Kautilya Economic Summit, she stresses that the countries that maintain more openness, and try and move as best they can will be the ones who will grow more amid growing geopolitical uncertainties. Edited excerpts:

 

How do you see India's position evolving in this new global world order amid rising geopolitical uncertainties?

 

The whole world is facing that uncertainty, and everybody's going to have trouble, and it's certainly unfortunate for everybody. I don't think anybody will gain. The position of any country, including India, will depend on what they do and how they react to it. Countries that try and move as best they can within an open framework, keeping competition going will do better than the countries who say- ‘we've got to close ourselves off and protect ourselves.’ And seems to me, the most important thing is that the countries that do maintain more openness will be the ones who will grow more and they will therefore be the ones that will be seen to be the successful ones, maybe carrying the others along eventually.

 

India’s Finance Minister has talked about India wanting to be self-reliant while pursuing bilateral trade agreements. How is this strategy?

 

Many countries that are not the aggressors in all this will find a way to do a WTO minus two or minus one and have good relations with all the other open economies. Obviously, there can be better relations within Asia. If India goes back to the bad old ways, and there's some signs that say that it might, this would be harmful for India and for the world. But on the other hand, India has a great opportunity right now to continue with the liberalisation policies that started in 1991 and to think about ways ahead, integrating more openly with the other Asian countries and trading partners who are not raising their protections.

 

What reforms do we need to undertake to achieve our growth goals?

 

I think there is a calculation of 8 per cent per year growth till 2047. That's going to take quite a bit of reform. India has done a lot, but there's a long way to go. And the tradition of putting government controls is still stronger than perhaps it should be, and I would hope for a little more emphasis on supporting business and opening competition at the same time. And I'm afraid what India has tried to do is support business but closed off competition. And that may be part of the reason why India has not grown faster. Structural changes that make it a more flexible, open economy in labour markets and capital markets is needed.

 

What do you think lies beyond these ‘turbulent times’ which is the theme of the conclave, especially in terms of US sanctions, penal tariffs etc?

 

I think it is a disaster for us. It's terrible for us as a country, and of course, I certainly don't think it's good for the world either. But the United States is going to be the country most hurt.

 

And that will change the world order?

 

But that's over longer term, and I hope that before that, we learn our lesson, and I think we will. Already the cracks are beginning to show. I do think that there is a reasonable chance that the voters of the United States will come back to their senses. If we want to stay as a reasonably productive, advanced economy, we can't do this. If you need to help the industry, do not do things that will be impossible to remove. Do not do your own stupid and say they put tariffs, so we can put on tariffs. Look at ways to fend as best you can, including the closer regional ties.

 

Do you see India getting a seat at the high table for discussions as the new international rule making is evolving?

 

I hope so. And I think India should be there. But I think as long as India, did say, it’s in the past tense, well, we're different because we're developing, then I don't think India will need a seat at the high table, because you’re not doing it anyway.

 

In terms of reforms, India brought in GST rate rationalisation. What more reforms should we take up?

 

Education in India still needs a lot of work and I would guess that there are other public services the same way. The labour markets need to be much more flexible than they are. I think going to contract labour is only a partial solution, because with contract labour, you don't train the workers.  A lot of the stuff in India has moved in the right direction, but it has further to go.