If India really needs to import from China to reduce costs, it's fair: World Bank Country Director

Auguste Tano Kouame

As the World Bank revised India’s growth outlook upwards, its top official in India expressed optimism that the country’s agriculture sector, which experienced a growth slowdown in the April-June quarter of FY25, will rebound in the coming quarters and significantly contribute to the country's overall growth.

Speaking to Moneycontrol, Auguste Tano Kouame, Country Director for India, World Bank, emphasised the importance of agriculture, along with trade, private investment, and consumption, in driving India's growth towards an estimated 7 percent for the current fiscal.
The agriculture sector’s growth decelerated to 2 percent in Q1 FY25, while it grew only at 3.7 percent in FY24. Kouame attributed the slowdown to the delayed impact of the monsoon, which he expects will manifest more clearly in the upcoming quarters.

“We think agriculture will do quite well this year, and private investment and private consumption are also picking up. With monsoon, expect agriculture to pick up this year, and there is always a lag between monsoon and its effect on growth, which takes a few quarters. We didn't see that impact in Q1, but we will see the impact on Q2 and Q3 numbers, so we think agriculture will be a strong contributor to growth this year,” Kouame told Moneycontrol.

Trade

Kouame also highlighted the critical role of trade in India's economic expansion. He said for India to leverage trade for growth, it must focus on reducing trade costs, lowering both tariff and non-tariff barriers, and accelerating trade integration with other countries.

“Trade will become a very important source of growth and job creation. India will be able to export labour-intensive goods, and growth will be more inclusive,” he said.

Imports from China

Addressing concerns about India's trade relationship with China, Kouame said, “No country should fear the import bill because you are importing for the right reasons; it's a good bill. If you really need to import from China to reduce costs, it's fair.”

Middle-income trap

On the topic of India's progression to a high-income economy, Kouame dismissed concerns about a "middle-income trap," expressing confidence in India's ability to continue its growth trajectory.

“I do not see India's growth slowing down where it will be trapped. India will move from middle income to higher income and then to high income. I can't put a date but it will happen,” he said.
Kouame also underscored the need for job creation that is inclusive, urging India to expand its export markets to less advanced economies like those in Latin America and Africa, which would benefit from labour-intensive goods and support employment growth.

Private investment

Ran Li, Senior Economist at the World Bank, emphasised the need for private investment to drive future growth.

“The scenario of higher growth in India requires a higher share of private investment to GDP. In the past few years, the overall investment has been mostly on account of public investment or household investment in real estate. But we are optimistic because public investment creates a crowding-in effect for private investment. The conditions are right for a new private investment cycle to take over,” Li said.

PLI scheme

Li acknowledged the potential of the government's Production Linked Incentive (PLI) scheme for job creation but stressed that broader systemic changes, particularly in trade policy, were necessary for a transformative impact on the economy.