Long way to go in terms of Indian engagement with global mkts: John Lipsky

Lipsky said that there's still a long way to go in terms of Indian engagement with global markets

John Lipsky, senior fellow at Foreign Policy Institute, School of Advanced International Studies, Johns Hopkins University, and former first deputy managing director of the International Monetary Fund (IMF) spoke to Ruchika Chitravanshi in New Delhi on the challenges for the global and Indian economy going forward, MDBs, and more. Edited excerpts: 
 

In a world facing a polycrisis, with the latest addition of the Israel-Hamas war, what do you think of the medium-term growth potential of the global economies and India? The IMF recently said the Israel war has cast a dark cloud on its projections.

The Fund was talking more about the near-term risk to growth. The threat now, and certainly part of the reason that the Fund is worried about the medium-term outlook, is fragmentation. I am not comfortable with this notion of polycrisis. But I would say since World War II, there wasn’t a clear vision of recreating global markets in goods and services by opening, reducing the trade barriers, and rebuilding a financial system that would support the growth in global trade. That climate change, which threatens, among other things, agricultural patterns, etc. requires a new look at an effective global system that doesn’t quite exist.

India wants to become a developed country by 2047. What are the three things that you think India should pursue in terms of its reforms or focus areas to achieve that? 

Creating a true national market and improving national systems, including infrastructure, education, health, et cetera, strikes me as important. And secondly, Nobel Laureate Michael Spence headed the Commission on Growth and Development: What that commission demonstrated is that there is no case of a country sustaining national growth that wasn't in the process of opening to global markets. And although there's been a lot of development now in the growth of services, in the export of services, there's still a long way to go in terms of Indian engagement with global markets.

There is a lot of talk now about MDB reforms. Do you think these institutions have become ineffective?

I don't know if it's exactly fair to say that these institutions have become ineffective. I would say they weren't designed to deal effectively with issues of global public goods. And that's why, for example, when you look at the efforts to confront climate change, ultimately the measures being discussed are national measures, not global measures. Coming up with a standard definition of the problems, or a standard analysis of the proposed solutions, turns out to be a very big challenge. So it's not as if there's an easy answer to these rather large challenges of global issues. There needs to be changes in the practices of these institutions, and there needs to be evolution of their membership that maintains their legitimacy. 

Globally, there is more and more stress on self-reliance, and India has brought in policies such as restrictions on laptop imports. What do you think of such policies? 

Well, I've been very concerned. There was a pledge made by the G20 leaders from their first meetings — a no new protection pledge that hasn't been honoured. We have moved, not decisively, but also not imperceptibly, away from open markets. And there's been a tendency towards a more protectionist attitude. Sometimes rather explicit, sometimes more nuanced, but it's hard to feel optimistic that is a successful strategy. 

What about the need to be self-sufficient in terms of let’s say, food security?

Everybody needs to be self-sufficient in everything. Where do you draw the line? Does each state need to be self-sufficient in everything? Actually, the global trade in foodstuffs is rather small, relative to total consumption. National controls, national policies, agricultural policies tend to inhibit free trade in agricultural goods. Countries slapping export controls is not conducive towards producing a globally efficient system.

What three big challenges should India concern itself with towards its ambitions to become a developed economy? 

One, a continued development of the financial sector, a development of national markets, and we've seen that India is capable of producing highly skilled technicians that can be successful on a world scale, and make sure that that continues to be developed.

What do you think of India’s Unified Payment Interface? 

It's great that individuals have digitally based personal finances. We need a more security-based, flexible, and richer financial system. The bank-dominated system, especially when the state banks were so dominant, was not conducive to the most efficient development of the Indian economy.