NITI Aayog Vice Chairman Arvind Panagariya said China which is pushing for its investment in big ticket infrastructure projects in India like the high speed train should make its loans more attractive.
Pitching for large scale Chinese investments into India’s massive infrastructure expansion plans, NITI Aayog Vice Chairman Arvind Panagariya has said China should make its loans attractive compared to Japan’s “incredibly attractive” finance.
Panagariya, who attended round-table on India-China economic cooperation between NITI Aayog and China’s Development Research Centre (DRC) early this week, said China which is pushing for its investment in big ticket infrastructure projects in India like the high speed train should make its loans more attractive.
“High speed rail is an expensive proposition. What kind of finance Chinese are willing to bring to the table is important. Japanese are bringing incredibly attractive finance to the table.
“They are offering 40-year loan where there is no payments for 10 years and after that only 0.3 per cent a year. So it is a highly concessional loan. Chinese are not offering anything close to that. So there is big difference what Chinese offer and that of Japanese,” he told PTI.
China is vying with Japan to build bullet trains in India.
While Japan is currently conducting feasibility study for Mumbai-Ahmedabad bullet train, China has undertaken a similar exercise for Chennai-New Delhi corridor.
“Eventually we need high speed rail. Fiscal constraints we face. Land is a problem, which we must solve and is solvable. That does not worry me so much. Finance is important. If we are getting limited amount of finance, then we have to make a decision to use of high speed rail or expand the electrification of existing railway,” he said.
India has sought China’s assistance to increase the speed of the existing network as well as modernisation of some the railway stations.
China’s out bound investmentÂ in different parts of the the world rose to USD 95.21 billion in the first ten months of this year, registering an increase of 16.3 per cent.
Last year, China’s ODI amounted to USD 102 billion making it third biggest investor after the US and EU.
Chinese officials say Chinese investments in India so far amounted to about USD three billion.
On India’s mounting trade deficit with China, Panagariya pointed to the restrictions in Chinese market.
“From the economist point of view what we have to worry about is the overall aggregate deficit. Bilateral deficit with a single country is less of a problem with a caveat that if this it is due to some specific restrictions in the country with the surplus,” he said, replying to a question about the trade deficit with China exceeding USD 46 billion last year in about USD 70 billion trade.
“That asymmetrically impact the exports of the county with deficit. So if India’s exports are low to China it is because the commodities India is capable of exporting face high restrictions in China,” he said, pointing to New Delhi’s efforts to prevail on Beijing to open up more for India’s IT and pharmaceuticals.
On concerns about China’s economic slowdown impacting India, he said, “Chinese economy is USD 10 trillion, which is second largest. Even if it goes slower rate 6 to 7 per cent in ten years or less it will cross US economy which is around USD 16 trillion.”
China’s economy has dipped below seven per cent to 6.9 per cent in the third quarter.
Panagariya said seven per cent growth on 10 trillion is still a lot of growth.
“I do not see that 10 per cent is even better, but there are no examples of an economy that has grown about 10 per cent for more than three decades. The slowdown of China is certainly consistent with the experience of South Korea,
Taiwan and Singapore which are grown at those kind of rates,” he said.
“China’s slowdown is not a big surprise. But quite contrary if China continued at 10 per cent for the fifth decade that would be surprise,” he said.
“As far as India is concerned we still have both in terms of large Chinese market for India to benefit from but also the slowdown means China’s export expansion will decline or at least the growth in export expansion will decline. That gives opportunity for India to capture part of the market space that China will be quitting,” he said.