In Conversation: Arvind Panagariya & Rajiv Lall
Mumbai, 25 November, 2016 – Arvind Panagariya, Vice Chairman, Niti Aayog was in conversation with Rajiv Lall, CEO of IDFC Bank on areas that ranged from NITI Aayog to international trade.
Asked if US’ withdrawal from TPP will affect world trade, Panagariya said that as a global protection measure, it does not work for global trading system. It opens markets for the members of the agreement but isolates the nonmembers which is discriminatory as per article one of the GATT agreement. He is of the opinion that the TPP would not have any substantial impact on India’s trade.
On multilateral agreements front, Panagariya maintained that India is making concerted efforts towards its global multilateral agreements. However, it needs to focus on bilateral relations especially with EU and now Britain after the Brexit. Panagariya said that US is on its way to recovery from the 2008 financial crisis and Europe is seeing slow recovery. But it is China and India who will drive the engines of growth. China is witnessing a rise in wages and the economy is becoming inclusive. India needs to take this opportunity to tap into markets that China is losing its focus on, so that it enhances its reputation as an investment destination. There are a number of companies from Taiwan, South Korea, Japan and other Asian economies that are increasingly investing in China. It is these investors that India needs to attract.
When asked by Lall about supply side constraints, Panagariya said that India should focus on increasing its share in the existing global market than on the size of the global market. Its current share is only 1.6% in the existing market of 1.8 trillion. He said India needs to have a global focus on creating a favorable ecosystem for foreign companies in India. This will also foster competition. He also shared his target of having coastal economic zones in Gujarat and Hyderabad which have the potential provided the supply side constraints are adequately met.
When asked by Lall about why India climbed up only 1% in the World Bank rankings of ease of doing business, Panagariya said that India had the highest FDI investments last year. The Enterprise survey is diverse from the World Bank ranking and the numbers don’t necessarily give the real picture.
The infrastructure for cash transfers is not fully developed. And it is also difficult to assess the distribution and benefits of cash transfers. The big question of demonetization was also asked, to which he replied that it is one of the many measures taken by the government to abolish corruption and black money distribution. He said that the government has a systematic process in place. He thinks it’s a matter of a quarter before the problem of liquidity is solved.
He also shed some light on the work of Niti Aayog. The committee has analyzed 74 sick firms and 17 have been set up for strategic sales. The medical council act has been replaced and there is a lot of work taking place to ameliorate the education space in India.
Reported by Karishma Talwar, Programme Officer, Asia Society India Centre.
This programme is part of Asia Society India Centre's Asia: Beyond the Headlines series. A series of conversations with leading policy makers and thought leaders about critical issues facing Asia and the United States.