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    Hello and welcome to the webchat with Mr Ninan on implications of India being the world's fastest growing economy

    T N NINAN:

    Good afternoon, everyone

  • A


    Given the head-start the Chinese economy got during Deng Xioping regime, the size of its debt holding (US bonds) has also increased till it hit the ceiling and then tumbled recently. How would India's growth maintain the balance and not follow the same trajectory? Do you think that in Asia, India could counter China in terms of economic hegemony or surpass it in near future?


    There is little or no prospect of India countering China; Chinese power is very much greater All East Asian and indeed most South Asian countries now have closer Chinese trade links that with either the US or India. China's military budget is at least four times ours, and its ability to invest in other countries is multiples of ours This can be seen not just in Asia but also in Africa. We will have to wait a long time before we can challenge Chinese influence in most countries

  • R


    Sir, given the climate of personal animosity in our politics, is it possible to bring much needed economic reforms? Is there a way to revive the economy without big legislative reforms?


    Many changes are possible without changing laws, just as many changes can be introduced through the Budget because that does not need Rajya Sabha approval. Most of the issues that come in the way of ease of doing business have to do with govt rules and procedures, not laws. Animosity is a problem. An even bigger problem is when something that you wanted to do in government you oppose when you are in the opposition. This has happened through the last decade and more, and we have to find a way to get rid of obstructionism which holds back the country.

  • S


    What are the implications of china's economic slowdown? how it will impact global economy?


    Chinas slowdown means many things for India. It is the primary cause of the slump in commodity prices like oil, and iron ore and steel. This has improved our balance of payments. On the other hand, the fall of Chinese demand for such products has forced Chinese steel producers to look for export markets like India's, which has out pressure on our steel producers, while iron ore exporters like NMDC have had to slash prices and will report a slump in profits. On a broader front, what it means is that India begins to look more attractive for foreign investors, both portfolio and direct. So we could expect to see greater international interest in India.

  • U


    Isn't fastest growing a relative term, this does not imply India will attain the required level of growth to provide jobs to all those entering the jobs market, Will India ever grow fast enough to provide jobs for all ?


    Jobs for all should also mean jobs at a minimum level of income Today half the country is engaged in agriculture, but income levels are low and people should be moving off the land into manufacturing and services activities It is easiest to find jobs for all if we encourage labour-intensive activities that provide entry-level jobs for school leavers. This we have failed to do because of rigid labour laws that hold back the most labour-intensive industries, like garments - where Bangladesh has overtaken us in the last decade. Also, sectors like tourism and retailing provide jobs for school-leavers but we have discouraged organized retailing, and we have to clean up the country before it becomes attractive to more tourists. In short, there are many things that need to get done.

  • S


    How will the 'AAM AADMI', especially middle class will be impacted? What will be roadmap for India in comparison with China?


    The size of the middle class will grow rapidly. Today we can say that between 25 and 30 per cent of the population belongs to a genuine middle class, while another quarter constitutes the neo-middle class. If we got a decade of rapid growth, the size of the real middle class could double, which means many markets will grow exponentially - like cars and civil aviation. China is already five times India's economy, and the two economies have become very different. They cannot any more be bracketed together, so we have to follow what works for us in our stage of development, not focus on copying China.

  • A


    What would be the chances for India to achieve and sustain high growth for longer period without fixing basic issues, like no administrative reforms in Government (from municipals to ministries), policing , judiciary?


    It is a good question. I would say that the chances of India getting back to 9 per cent growth are close to zero, especially given the state of the world economy. All economies that have grown rapidly have enjoyed rapid export growth which in today's global environment is not possible. However, it should not be difficult for India to sustain 6.5 or 7 per cent growth for the next decade and beyond; we have already done 6.5 per cent annual growth in the last 25 years, and continuing that should not be a problem. In the last 7 years, since 2015, we have moved from being the worlds 12th largest to the 7th largest economy; in the next decade we will probably become the fourth largest economy. So, unless we commit serious blunders, the future is bright

  • V


    Sir, although China seems to be far ahead in mass manufacturing what could be India's competitive edge to maintain leadership?


    We would be mistaken if we think that higher wage costs in China will automatically move mass production items to India, because there are other countries with lower wages than in India, like Bangladesh and Vietnam. What we can excel in are items that have a large domestic market, such as mobile phones which companies have started assembling in India. Another area is defence manufacture, where the scope for indigenisation is large. We also score in areas where some creativity is a part of the manufacturing process, like in garments that have some fashion component, or design-oriented leather goods. And finally we score in any white collar work or which involves knowledge of English.

  • R


    In the first place, do you agree with we are the fastest growing economy? Since there were lot of changes in method of calculating the GDP, the real food inflation rocketing up and real estate sector in doldrums.


    As I have already mentioned, many smaller economies are growing much faster than us, in Africa and elsewhere. What is true is that among the large economies we are the fastest growing. There are question marks about the new GDP calculations. Other data like exports growth, corporate profits, electricity consumption, etc do not support the GDP numbers that are being reported. But we have no other numbers to do by, so we have to go with what we have. Inflation is not an issue, economic growth is calculated in constant rupees, ie after discounting for inflation. The real estate sector is seeing a slowdown because prices had gone up too fast, and for most people real estate has become unaffordable It will take time before the market is properly aligned, ie when capital values are such that rental income is at least 3-4 per cent of capital cost. Today in some places the rental return is barely 1 per cent of capital cost, so most people prefer to put their money elsewhere.

  • A


    Sir, what is your take on the current R&D infrastructure in India and what steps should the government take to retain talent?


    The encouraging aspect is that R&D has started doing much better in India because international companies like Intel and GE, Honeywell and even Samsung, have realized that Indian engineers are not only cheaper but also better than engineers elsewhere These and other companies have focused on putting more and more of their research work in India; the jet engines that GE sells are designed in Whitefield out side Bangalore. Some of the sensors that go into help cars to guide drives, as when parking, are also worked on in Bangalore. Indian companies have become very good at chip design. So there is much more and much better research work being done in India than ever before.

  • J


    In you view, keeping in mind the events of the last few months where China's growth has come under pressure and its markets in turmoil, what are the lessons Modi can take as he tries to steer India into a similar trajectory?


    There are many aspects of the world economy that Mr Modi will have to keep in mind; China's slowdown is only one of them. For instance, the agreement that has been reached in the Transpacific Partnership, or TPP, between a dozen countries that account for 40% of world GDP, can shut India out of many crucial markets unless we negotiate to become part of the system That means bringing about many changes in our domestic rules and laws, on product standards, environment norms, labour laws, and so on. It is not easy to do these things, but if we don't do them then we will have a problem on the trade front. Similarly, the currency and monetary policies of other major economies will have implications for us; if the US were to raise interest rates, a lot of money could flow out of India We have to build system security. The over-all point is that the world is not in very good shape, there are many points to worry about, and we should be undertaking domestic reform in order to withstand strong winds blowing in from overseas.