World Bank: India’s economic growth driven by domestic demands, need to focus more on exports

Date:

Trending

India‘s economic growth in recent years has 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 needs to focus on export-led growth.

- Advertisement -

Praising attempts to liberalize 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 seen also 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.

- Advertisement -

The polling for 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 percent 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 have 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 want to trade also 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 liberalization 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 percent of its GDP.

“What they should have exported is 30 percent 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 percent of their GDP because when you’re small you’re a lot more open.

“But even for India, 30 percent would have been normal if you look at the experience of other countries. It’s only 10 percent. So that’s an enormous gap. And the gap is widening in the last couple of years,” he told PTI.

According to him, friction between India and Pakistan is unhelpful to the trade and economic growth in the region.

“The lack of regional integration is not the main course of the under performance in exports. And that’s often the assumption. When people look at South Asia, immediately the problem of very limited regional integration jumps up,” he said.

A latest report of the World bank on South Asia, he said, asserts that the economic under performance of South Asian countries is mainly because they are locked on fundamental issues within the domestic economies that have prevented the countries to become much more export-led, like one sees in East Asia.

Trade liberalization, flexible labour markets skills, trying to address the big problem of the difference between the formal economy and the informal economy, he said are some of his recommendations for the South Asian countries.

“So, it’s a lot of domestic issues also. It’s not just trade policies. A lot of domestic issues that have to be addressed to unleash that potential that has not been utilized now in exports. It’s not one single issue that can solve …,” he said.

Responding to a question, Timmer said the South Asian countries need to learn from China.

“The fact that China has been so competitive for so long means that China did something right whereas South Asia didn’t do it right. There was a clear focus in China to have export-led growth and to integrate into global markets. And you see a sharp increase in productivity at all. This is not an explanation that we couldn’t compete. Somehow, the Chinese did it better than South Asia,” he said.

The top bank official asserted that China is a “big opportunity” for South Asia.

“The slowdown in China is not a cyclical slowdown. It’s not because they don’t demand anymore. They are slowing down because of the supply side. They’re running out of cheap labour in general because of their success. They are no longer that competitive, and they have now that policy that they want to rebalance their economy much more towards domestic services, less towards exports,” he said.

That means that it has become easier to export to China which is very important, Timmer said.

“It has become easier to compete with the Chinese. So for me China is, what is happening at the moment, is a big opportunity for South Asia,” he stressed.

THE SNAPSHOTS

Sign up to get quick snaps of everyday happening, directly in your inbox.

We don’t spam! Read our privacy policy for more info.

- Advertisement -

Support our independent journalism PayPal (Outside India) For PayU (For Indian Readers).

Krishna Mali
Krishna Mali
Founder & Group Editor of TechGraph.

More Latest Stories

More Articles

How AI-Powered Online Platforms Are Revolutionizing Life Insurance Recommendations

Anyone with a child, a spouse, a life partner, or a parent as a dependent needs life insurance. Purchasing a life insurance product has...

Loans in Crypto Wallet: Useful Feature or a Security Threat?

Integrating crypto loans into digital wallets is gaining traction, allowing users to borrow and lend crypto assets without the need for traditional financial institutions. With DeFi revolutionizing lending, crypto loans provide an alternative to banks while offering quick access to liquidity. However, concerns about security...

From Arcade to Adventure – The Evolving Face of Entertainment and Why It Counts

Entertainment has always been a reflection of the shifting expectations of society. Earlier, people...

How Technology Helps Combat Various Viruses and Diseases

Technology has transformed the ways we approach vaccines, particularly for the flu. One noteworthy...

The Long-Term Power of Investing: Selecting Undervalued Industries

Investing can seem overwhelming, especially for beginners, as the numerous options and strategies available...

The Impact of EdTech on Student Outcomes in Higher Education

The introduction of interactive whiteboards in the early 1990s marked a major shift in...

Shell Executive Robin Mooldijk Sells €1.69 Mn in Shares

Shell plc’s Projects & Technology Director, Robin Mooldijk, has offloaded 50,000 shares in the...

HR Chief Amy Coleman Reports Over 46,000 Microsoft Shares in SEC Filing

Microsoft (NASDAQ: MSFT) Chief Human Resources Officer, Amy Coleman, has reported her stock holdings...

12 Eye-Popping Hacks to Make Your Next Business Presentation Sparkle

Business presentations are often necessary to gain new clients and showcase what it is you can offer, but more often than not, they end...

BGC Group raises $700 Mn in bond sale to refinance debt

BGC Group, Inc. (NASDAQ: BGC) has finalized a $700 million private offering of senior...

Alphabet Legal Chief John Kent Walker to Sell $2Mn in Shares via Morgan Stanley

Alphabet Inc.’s (NASDAQ: GOOGL) Chief Legal Officer, John Kent Walker Jr., has filed to...

From Startup to Success: Essential Steps for Landscaping Entrepreneurs

Starting a landscaping business is so exciting, blending creativity with the reward of transforming...

Predictive Analytics: The Key to Supply Chain Resilience

In today’s interconnected global economy, supply chains are the lifeblood of businesses, weaving intricate...

Empowering Growth: Boosting the Robotics Sector with Targeted Support

India's robotics sector is emerging as a key area of technological progress, driving innovation across industries such as manufacturing, healthcare, logistics, and agriculture. With...

Software and Technology Changing the Industry

The advent of software and technological advancements has been a game-changer across various industries. From enhancing productivity to transforming operational dynamics, tech plays an integral role today. This article delves into how software and technology are revolutionizing industries worldwide, providing insights and data to...

Jensen Huang Offloads $49.8Mn in Nvidia Shares

Nvidia (NASDAQ: NVDA) CEO and President Jen-Hsun Huang has disclosed the sale of 431,611...

Canada, Australia Partner to Build $6 Bn Arctic Radar System

In a bid to enhance Arctic and national security, Canada's Prime Minister Mark Carney...

Why Smart Cities Are the Future of Water Conservation

Water conservation has become an important factor due to climate change and worsened water...

Interview: Vserve CEO Siva Balakrishnan on SEO Secrets for Amazon Seller Success

In an interview with TechGraph, Siva Balakrishnan, CEO and Founder of Vserve, shared how...

Alphabet CEO Sundar Pichai Increases Stocks Holdings Amid Dividend Adjustment

According to a regulatory filing with the U.S. Securities and Exchange Commission (SEC), Alphabet...

Layer PR Wins SME News UK Awards, Expands to Bengaluru

Layer PR, a global public relations firm owned by TechGraph, has secured two major...
00:02:59

US President Trump Presses NATO on Greenland Annexation Plans

During a meeting with NATO Secretary-General Mark Rutte on Thursday, US President Donald Trump...
00:01:37

UK PM Kier Starmer Abolishes NHS England To Bring Health Services Under Govt Control

British Prime Minister Keir Starmer has announced plans to abolish NHS England and bring...

The Role of Edge Computing in AI-Powered Cloud Solutions

With businesses including artificial intelligence (AI) in their operations, cloud computing has grown in...

From Startup to Success: Essential Steps for Landscaping Entrepreneurs

Starting a landscaping business is so exciting, blending creativity with the reward of transforming...

Meta Chief Legal Officer Jennifer Newstead Offloads Shares as Part of Trading Plan

According to regulatory filings, Jennifer Newstead, Chief Legal Officer at Meta Platforms, Inc. (NASDAQ:...

Nvidia Director Aarti Shah to Sell Shares Worth $2.37 Mn

Aarti S. Shah, a director at NVIDIA Corporation (NASDAQ: NVDA), has filed a notice...

Alphabet COA Amie Thuener O’Toole Increases Stock Holdings

In a filing with the U.S. Securities and Exchange Commission (SEC), Alphabet Inc.’s (NASDAQ...

Elon Musk’s X Sues Indian Govt Over Content Regulation Clash

X Corp, an Elon Musk-owned social media firm, sued the Indian government in the...

Predictive Analytics: The Key to Supply Chain Resilience

In today’s interconnected global economy, supply chains are the lifeblood of businesses, weaving intricate...

UK PM Kier Starmer Abolishes NHS England To Bring Health Services Under Govt Control

British Prime Minister Keir Starmer has announced plans to abolish NHS England and bring...

VIDEO: US President Donald Trump Calls NBC A ‘Worst Network’ On Television

During a press meeting at the Oval Office on Wednesday, US President Donald Trump...

The Role of Edge Computing in AI-Powered Cloud Solutions

With businesses including artificial intelligence (AI) in their operations, cloud computing has grown in...