Delivering the CD Deshmukh memorial lecture on Thursday, Lipton said economic expansion in India would help these people as the economy was growing at 6-7 per cent a year if one disregarded the current slowdown. Besides, Indian businesses are more agile compared to their counterparts elsewhere, he said at the event, organised by the National Council of Applied Economic Research (NCAER).
Globally, he said, 14 per cent of workforce or 375 million workers could lose jobs to automation. Lipton warned that business model of low wage and labour intensive industries was under threat.
As India proposed import duty on a number of products in the Budget, Lipton said rising tariffs were having a drag on competition in India that hampered strong integration of the economy with global value chains.
He said competition might hurt in the shorter term, but it would make companies more able to grow organically over time. Tariffs have been on a rise in India for the past few years.
Citing benefits of competition, he said if India decided to play cricket only domestically, it would not be as great a cricket team as it was now. Though the cricket team struggled in initial years, competition made it stronger over years, he emphasised.
He said India should look at comparative advantages. According to him, tariffs on intermediate goods constrain the boom of manufacturing sector that creates jobs in India.
India is poised to be the engine of secular dynamism in a world that is witnessing secular stagnation (in the form of low interest rates and disinflation), he said, using terminology coined by former US treasury secretary Larry Summers. Though secular stagnation is restricted to advanced economies, its spillover globally cannot be ruled out, he said. Markets are lending to governments globally at negative interest rates, he said.
“For example, German pension funds can certainly serve better off investing in India steadily growing at 10 per cent. Currently, despite standing with a huge current account surplus, German savings end up getting invested in US treasuries, that give a return of 1.7 per cent,” Lipton said. He said the global growth was down due to trade tensions between the US and China but its impact had been limited on India compared to other Asian exporters.
Referring to coronavirus, he said: “We have just begun witnessing how a pandemic is having an impact on global value chains.” India could play a truly unique role to invigorating global growth, as it has a huge untapped demand. Addressing weak domestic demand and restoring balance sheets of lenders and borrowers can help it come out of the slowdown, Lipton said.
For investments to come back, legal and regulatory hurdles should be minimum, he added. Other issues confronted by the economy are falling rural consumption, slowing exports growth and rise in unemployment, he said.
He advised India not to worry about the current account deficit now and instead attract capital investments to finance it.
Lipton said reforms had lifted millions out of poverty in the country.