India, which aspires to grow at high rates, must continue to open up to the world despite the recent trend of deglobalisation, Montek Singh Ahluwalia, former deputy chairman of the erstwhile planning commission said.
“There is a global trend which is an increasing nationalistic perception on economic policy. People distancing themselves from China. Not trusting supply chains which are located too far away and so on. And all fashions spread and that fashion has also spread in India,” Ahluwalia, who was one the key persons behind India opening up its economy in 1991 amid a balance of payments crisis, told Moneycontrol in an interview.
“Am I worried we are becoming too protectionist? The short answer is yes.”
“In my view the transition to 8% growth is not going to be possible unless we retain this sensible view that Indian needs to continue to open and integrate,” he added.
Watch | Montek Singh Ahluwalia on why the 1991 reforms were a watershed moment for India's economy
India has in the recent years raised tariffs on a raft of goods and shunned recent multilateral trade pacts but is rushing to stitch a bunch of free trade deals with several economies to help boost exports that the Narendra Modi-administration looks as a major growth driver.
India has signed an early harvest deal with Australia and is negotiating pacts with the United Kingdom and the European Union.
Alhuwalia favours India joining the trade pacts and advocates a reversal of import duties. He is also concerned about the relative open-ness of the Indian economy compared with its peers.
“Although the rest of the world has been phenomenally open, and is now becoming a little bit closed, we generally have been phenomenally closed and we became a lot more open but the present position is that we are much less open than other countries,” he said.
“So, I still remain of the view that even if the rest of the world is closing…for India, we probably need to continue to open and integrate.”
To be sure, Ahluwalia acknowledges that his position is possibly a controversial and wishes the issue were debated more.
India favourably placed
The Indian economy is poised to do well in the future as Asia will do better than other continents in the coming years.
Moreover, we are in a part of the world which as a whole is going to perform better and where the star performer China is slowing down, Ahluwalia said.
And with countries seeking to move away from China, India has a big opportunity on its hands but musty ensure that it is able to capitalize on it.
“Most people would say ‘look, we were earlier going to China which was hugely open in one sense…we want to go to a country which is also hugely open’ and we are not hugely open,” he said.
“They will say ‘look, is India as open as say East Asia or South East Asia?’ and the answer is we are not.”
But must open more
Ahluwalia is appreciative of India’s recent flexibility in geopolitics: the country is doing things we would not have done 10 years ago, but seeks that the same flexibility also be extended to trade.
While India is part of the Quad, it must also join the trade pillar of the grouping.
“Whether we end up joining a free trade agreement or not, is a decision that can be taken later but joining the pillar enables us to let people know what our concerns are and to engage in a discussion.”
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