BackIndia has to open up markets to gain from post-covid demand: Economists
The world economy, the world society does better with openness, with trade, with flow of capital, flow of ideas and movement of people, says Jeffrey SachsIndia has to shift a bulk of the people engaged in agriculture to manufacturing and services sectors, says Arvind Panagariya
PremiumThe covid-19 pandemic is unlikely to reverse the trend of globalization and India needs to open up its markets further to benefit from the post-covid-19 global demand, said economists.
“The world economy, the world society does better with openness, with trade, with flow of capital, flow of ideas and movement of people. This epidemic doesn’t change that fundamental point," said Jeffrey Sachs, an American economist, liberal, academic, public policy analyst and former director of The Earth Institute, Columbia University.
He said if the pandemic leads to a closure of the world, then the costs will be far greater than the direct costs of the epidemic.
“The fact that countries took steps to stop the movement of people when the virus was spreading is different from stopping globalization," he added.
And, going forward, India will be central to globalization.
“If India plays it right, it can do what China did, but for that, India needs to go back to being an open market as in the early 2000s. India should work towards creating a market where multinational companies (MNCs) have free access to resources if they want to run businesses from India for global markets," said Arvind Panagariya, Indian-American economist and professor of economics, Columbia University, who also served as the first vice-chairman of government think-tank NITI Aayog between January 2015 and August 2017.
Panagariya said India can gain over China in labour-intensive industries as rising wages have been making companies move out of that country.
“Today, we are wanting a lot of MNCs to come to our shores as wages have increased in China, at least in sectors that are important for India, which are the labour-intensive sectors such as apparel, footwear, furniture and assembly activities. We have 44% of our working population in agriculture and we need to move a lot of these out of agriculture and into manufacturing and services," he added.
However, these people will not go into industries, such as information technology or pharmaceuticals, they require jobs in which they can be trained in a short period of time, said Panagariya.
“That’s the market for us to take over, the apparel, footwear and furniture industries," he said.
Panagariya said for India to make meaningful gains in these industries, it needs to be part of significant trade organizations.
“That’s where RCEP becomes key. It is important for India to be a part of global trade deals. I understand the deal that was offered wasn’t very good, but we need to stay engaged and bring this to conclusion."
The RCEP, or Regional Comprehensive Economic Partnership, is a proposed free trade agreement between 10 member states of the Association of Southeast Asian Nations (ASEAN), and their free trade agreement partners, including China, Japan and Australia.
Panagariya suggested that India should focus on replicating a model similar to that of Shenzhen, China. This would be different from the special economic zones, as they create autonomous employment zones governed by independent labour and land policies, he noted. “But this requires the Centre to guide the states effectively," he said.
While recent weeks have seen rising tensions between India and China, Sachs said that in a world which will increasingly become multipolar, it is essential that India has a stable relationship with China.
“All countries should abide by common standards of the UN charter and international trade organizations. It shouldn’t be done through leader visits and headline accusations between two nuclear superpowers. It should be based on international trade principles and regional comprehensive trade agreements across sectors. The US wants to engulf India in anti-China arguments, which is not advisable for neighbours," he said.
Sachs said it was also essential for India to focus on public health and remain in control of the covid-19 outbreak.
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