India is caught in a vicious cycle on demand pickup: USISPF chief Mukesh Aghi2 min read . Updated: 17 Sep 2020, 12:41 PM IST
- Mukesh Aghi, president and CEO of US-India Strategic Partnership Forum, sees deeper economic ties around healthcare, defence, hi-tech, and agriculture, going ahead
- India's recovery is going to be more of a U-shaped one because there has not been enough demand-supply stimulus, Aghi says
NEW DELHI: Mukesh Aghi, president and CEO of US-India Strategic Partnership Forum (USISPF), a not-for-profit institution that works on boosting partnerships between the two countries, sees deeper economic ties around healthcare, defence, hi-tech, and agriculture, going ahead. He is also batting for a free trade agreement between the quad nations (US, Japan, Australia and India). In an interview to Mint, Aghi spoke of the recovery post covid-19, supply-chain realignments and why business imperatives could triumph political rhetoric around protectionism. Excerpts:
How do you see the post-covid recovery trajectory of both the countries?
There are broad differences in the recovery cycle between India and the US. We feel that the US will have a V-shaped recovery because the cost of capital is very low. Two, there is an abundance of stimulus money coming into the market for the businesses. When we look at India, our prediction is that it won’t be a V-shaped recovery. It is going to be more of a U-shaped one, where the economy is going to be flat for the next 12-18 months because there has not been enough stimulus both from a demand-side or from the supply-side. India is also not an export-oriented GDP; it is still an internal consumption GDP. Unless you get the demand pick-up, the supply-side will not invest. India is caught in a vicious cycle here. But we are seeing some green shoots, especially in the rural economy.
Where is the Indo-US economic relationship headed, considering that both the countries seem to have slipped into protectionism with visa curbs in the US and the narrative around self-reliance in India?
I won’t say that both countries have gone protectionist. H-1B (visa) is more of a political issue. The US has a shortage of over a million software engineers—US companies need these workers (on H-1B ) to make them more efficient, to make them more competitive and to make them more innovative. From the business side, there is a growing demand for these workers.On Atmanirbhar Bharat , we don’t see it as protectionist. It is like the '60s when India wanted to become self sufficient in food so the green revolution took place. I think the effort is to bring in self sustainability in critical items. Let’s talk about healthcare. India supplies about 40% of the US generic drug consumption. About 70% of the APIs come in from China and in certain cases, 100% of the APIs. India feels exposed there, so does the US. There is an effort by the two countries to shift the supply-chain.
Yes, in a small number of cases, there is the impact of duties. But overall, the US government is supportive of the supply-chain shifting from China into India or other countries.
It appears that other Asian countries are better placed to seize the opportunity on the supply-chain realignments …
You are right. Countries like Vietnam, Cambodia and even Bangladesh could benefit from the shift from China. I think this is an opportunity for India to usher in further reforms. Unless you are integrated into the global economy, you cannot be a global economic power. Those reforms are needed to compete with countries like Vietnam. The reason I say Vietnam is because there is an FTA with India—companies are saying let’s move manufacturing to Vietnam and you can still move goods duty-free into India. It is a catch-22 for India.
Disclosure: Mukesh Aghi is a board member of Hindustan Media Ventures Ltd, a group company of the publishers of Mint