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Nobel laureate Paul Krugman has said India may be able ride the next wave of globalisation through export of services but cautioned that the country could end up with mass unemployment. "As the world’s economies took off because of growth in the manufacturing sector, India stood apart and unique. It exported services, which was unprecedented,” said Krugman at the News18 Rising India Summit on Saturday.
He expressed optimism about India having a first-mover advantage in services which could drive a second wave of growth backed by a health working age population. India has changed the outlook that services can't be exported and can only be availed locally, he said. “Britain exports services by way of banking in the city of London, but India branched out into IT, call centres, etc.”
India’s demographic dividend can help spur the economy only if the country can provide jobs for the working age populations, Krugman said.
He, however, cautioned that against the lack of manufacturing sector jobs. “India’s lack in the manufacturing sector could work against it, as it doesn't have the jobs essential to sustain the projected growth in demography. You have to find jobs for people,” he stressed.
Making a case for manufacturing sector push, Krugman said, “Japan is no longer a superpower because its working-age population declined, and China is looking the same. In Asia, India could take the lead but only if it also develops its manufacturing sector, not only the services one,” he said.
India has come a long way by shedding the image of licence raj and ease of doing business has improved too, he said. “I was listening to the Prime Minister Narendra Modi's speech where he said India's improved its ease of doing business ranking from 148 to 100. That's not a badge of distinction but it's progress,” said Krugman.
He added that when China is taken out of equation the world would turn to to India. “Its GDP per capita has quadrupled, and it looks like Japan in the 60s. Japan went on to make a full transformation,” he added. India doesn't get the global attention it deserves, he said.
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