India must open up further, improve biz conditions: Arvind Panagariya
New York, Oct 2 India should open up further and make business conditions better for investors as it is likely to be the "natural place" for global firms that will face the challenges of shrinking labour and rising wages in China over the next decade, NITI Aayog Vice-Chairman Arvind Panagariya said.
Panagariya, participating in a conference on world trade at Columbia University here, said demographically the labour supply in China was now shrinking and the already high wages there are going to rise even quickly.
"This could lead global firms based in China to move out over the next decade and look for better markets." The leading economist said such a scenario presents an "opportune time" for India.
"These firms are going to go out of China. India is likely to be the natural place. So my pitch to Prime Minister Narendra Modi is that we ought to take advantage of this great opportunity, open up further, make business conditions better for the investors. That is ultimately going to be what will sustain growth in India over the next two decades," Panagariya said at the conference presented by Columbia's School of International & Public Affairs in association with Raj Center on Indian Economic Policies on Friday.
He said the pace of reforms in India slowed after 2004, with some reversal also taking place during that period. Due to this "India lost about 10 years' time.
"It however did manage to grow rapidly on the back of the reforms that were done in 1990s and early 2000s," he said. He said India is now "back into reforms and has opened up quite a bit".
"It is as open as China. Last year, in terms of the volume of foreign investment, India beat China," Panagariya said. He said there is "no question about it" when asked whether India has been late in opening up.
"India has been about 15 years behind. If you look at all the characteristics of growth, trade, India is about 15 years behind China," he said adding that when reforms were launched in India in 1991, the country was already 12 years behind its Asian rival.
"India's GDP is two trillion dollars today. This is where China was 15 years ago," he said but added that India has the potential to become the third-largest economy in the world in the next 15 years. He stressed that openness is a "key policy lever" that leads to high growth in a country.
He cited the example of China which lifted 700-800 million people out of poverty and became a "super-open" economy which today boasts of merchandise exports of 2.3 trillion dollars alone.
"Most countries don't have that kind of GDP. Openness is a very critical part of the Chinese growth experience and the massive poverty reduction that it brings about," he said.