Chief Economic Adviser Arvind Subramanian today expressed concern over growing protectionism in global markets and felt that India needs open markets to grow at 8-10%. Citing example, he said, India witnessed fastest growth during period when exports were highest. “I think, we in India have now a much bigger role in ensuring that world markets remain open…At the very least, any reversal of globalisation is something that we should be very very anxious about because if we want 8-10 per cent growth, I think we need open markets,” he said. The biggest beneficiaries of the open market policy or globalisation has been middle income countries and the continuation of this is in their interest, he said at an event organised by ICRIER here.
However, the idea of protectionism gained momentum recently after Donald Trum took over as the US president. Recently, the Trump administration has indicated that it wants to relook at trade agreements with countries where the United States buys more than it sells, including China, Japan, South Korea and Germany.
Besides, Britain has also started the process of exit from European Union. Subramanian said, India has done a lot on FDI and more would help in attracting investment. “We have done a lot on FDI and other areas, I think we need to do more,” he said. Speaking about ultra-loose monetary policy adopted by various advanced countries, the CEA said he was actually much less worried than the early indications about the pullout of the US for a number of important but obvious reasons.
“One, I think, there is a kind of emerging global consensus at the level of states, at the level of NGOs, at the level of decentralised structure…It has permeated too big thankfully, for anyone or other actor to be able to derail it in any significant, substantial way. And of course, I think that India has played,” he said. He had difference of opinion with former RBI Governor Raghuram Rajan on the ultra-loose monetary policy.
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“Have always had a difference of view on this with Raghu…My view always was that one, countries are going to take monetary policy in their own interest. Two, nobody has told India or Brazil to open up their capital accounts as they did…Above all, I think, you open up capital accounts, expose yourself to capital flows, you live with it. You have to deal with the consequences,” he said.
Rajan had urged the International Monetary Fund (IMF) to play an active role in questioning the stimulus policies of developed economies and called on emerging markets to have a bigger voice in global debates.
Developed countries were adopting monetary policies without consideration for the negative impact they have on the global economy and he noted emerging markets were engaging in currency intervention that sparked competitive devaluations, Rajan, the former chief economist of the IMF, had said.