Washington: India’s economic growth in recent years had been “too much” driven by domestic demand and its exports were about one third of its potential, a World Bank official said, asserting that the next government needed to focus on export-led growth.
Praising attempts to liberalise markets within India, Hans Timmer, World Bank Chief Economist for the South Asia Region, said, “That is what is needed to become more competitive.”
“At the same time, you’ve also seen of the last couple of years that the current account deficit widened–an indication that increasingly growth came from the non-tradable sector–from the domestic sector, and that makes it difficult to export more,” Timmer told PTI in an interview.
The polling for the first phase of seven-phase parliamentary polls in the country is scheduled to take place on April 11, with the last phase on May 19 and the results will be announced on May 23.
In the last five years, he said, India’s overall growth was “too much” driven by domestic demand, which resulted in double digit growth of imports, and four to five per cent growth in exports.
“In more recent months, that turned around somewhat. But the broader picture was that that’s a minus,” he said.
“The pluses were that we had seen the GST trying to create more flexibility within the country, so that it’s easier to trade between states. That’s what you need if you also want to trade with foreign countries,” he said.
Responding to a question, the World Bank official said the focus of the next government should be on reducing the stimulus of domestic demand.
“That would be one. I think looking at trade liberalisation on the import side–that would be another to create more competition. I would look at what people feel as impediment in the labour market. Is it difficult to go to those new jobs? What about the startups of young people–do they feel restrictions or not?” he said, adding that it is also about female labour force participation.
“I think the most important thing is the understanding that you need export-led growth because that’s where you increase productivity when you compete in international markets; that’s where you gain knowledge by interacting with competitors and with customers abroad. And so, it is that mindset,” the top World Bank official said.
India, Timmer said, is exporting only 10 per cent of its GDP.
“What they should have exported is 30 per cent of the export of GDP, given all their characteristics. India is a big country, so normally a big country doesn’t export that much in per cent of their GDP because when you’re small you’re a lot more open.
“But even for India, 30 per cent would have been normal if you look at the experience of other countries. It’s only 10 per cent. So that’s an enormous gap. And the gap is widening in the last couple of years,” he told PTI.
