What we are saying is economic growth in China and Asia has to be consumption-driven than exports to the G-3. The other thing we should also look at is ways to increase trade within Asia. The US and Europe remain a very important market, no doubt. But Asia should be an important producer and consumer of its own output. So, Asia should be a destination for its own production.
But this is something futuristic. This cannot happen in four or six quarters.
No, it is not futuristic. This is happening. East Asia already trades 55% of its output within the region. India’s trade with China, Japan and Asean (Association of Southeast Asian Nations) is increasing. That is the structural shift which will have to happen. Our forecasts are not based on any dramatic shift, (and) as you rightly said, it cannot happen overnight. But that is the basis of our saying that Asia certainly will come out of the crisis sooner.
The G-20 met recently. Do you agree that given the current scenario, we need a coordinated approach to solve the crisis?
I very strongly support the G-20 call for coordinated action. But coordinated does not have to be identical. For example, China, which has announced a $586 billion (about Rs28.7 trillion) fiscal stimulus, has more fiscal space than India. India can’t have the fiscal stimulus of the same magnitude. But the approach has to be coordinated. It is very important that countries do not follow a beggar-thy-neibhour policy, be it on trade, fiscal stimulus or be it on monetary policy. But each country should design the programme to suit its needs.
But do you think India should also provide a fiscal stimulus to growth?
To the extent possible. But I think, for India, because of its fiscal deficit already being high, the important thing will be first to implement the projects and programmes which it has already approved.
It is very important to see that every rupee that is now being invested is productively employed. In India’s case, I think the fiscal space is more constrained, but still there is some room.
After the dust settles, do you think the centre of financial power will shift more towards Asia? How should Asian countries prepare for such a change?
No doubt about it. You already saw that happening at the G-20 summit. China and India played a very important role. I am very pleased that the world looks at it that way. Not as one side losing power and the other side gaining power, but in a spirit of cooperation that was obvious in Washington. It is now very obvious that China, India and Brazil will have a greater seat at the table. How should Asia prepare for it? I think Asia should play its role not only as a growing economic power but also as a responsive economic power.
I am very pleased that Prime Minister Manmohan Singh said that protectionism is not acceptable and we should be open. I would say it is a good time to restart Doha Round (of World Trade Organization talks).
What challenges have the current crisis brought to ADB and how is the bank preparing to face them?