BS BFSI Summit: Free trade effective in theory, not in practice, says CEA

India need not worry about trade battles driven by climate policies, Nageswaran said in his keynote address at the Business Standard BFSI Summit on Friday

Developing countries like India do not need to engage in the alarmist rhetoric about impending trade battles, especially when advanced economies have long abandoned their commitment to free trade and climate policies have already become extensions of trade protectionism, India’s Chief Economic Advisor (CEA) V Anantha Nageswaran said in his keynote address at the Business Standard BFSI Insight Summit on Friday.

 

“Developing countries should evaluate economic policy prescriptions through the lens of competitiveness, capacity, maintaining economic and social stability, and, increasingly, national security. Balancing these goals requires pragmatism, rather than an ideological commitment to any particular economic policy,” Nageswaran said.

 

The CEA emphasised that geo-economic integration does not benefit ordinary people. “Free trade works well in theory but never as well in practice.”

 

He explained that after reaching a certain development level, advanced economies removed the ladder of restrictive trade policies they had once used, preventing others from climbing to the top.

 

Discussing the impact of election results in the US and several other economies worldwide, the CEA said their effects will be felt for years if not decades. The election outcome, he observed, was positive for energy prices, which are expected to remain reasonable and affordable.

 

Nageswaran pointed out that, as India is on the cusp of transitioning to a middle-income economy, it needs not only reliable but also affordably priced energy supplies.

 

“It is always desirable and necessary to have the freedom and autonomy to determine the pace of such a transition ourselves. Countries must own the energy transition,” Nageswaran added.

 

He further emphasised that while renewable energy is desirable for many reasons, it presents challenges since it is capital-intensive, requires much more land, and increases dependence on external sources for many inputs necessary for power generation.

 

The CEA also highlighted a creeping informalisation of the workforce in India’s formal corporate sector, even though profitability growth had surged by a multiplicative factor over the past four years.

 

“India’s strength lies in its demography, and it is incumbent upon the private sector to play its part in preserving this advantage, provided all stakeholders recognise their roles and obligations,” Nageswaran concluded.