Informist, Wednesday, Sep 18, 2024

--NITI Aayog CEO: Need to address India's regional growth imbalance
--NITI Aayog CEO:Mfg sector mustn't get intoxicated by local mkt size
--NITI Aayog CEO: Working on boosting electronics, auto parts export
--NITI Aayog CEO:India needs to massively cut tariffs for free trade
--NITI Aayog CEO:Need econ growth strategy to avoid middle-income trap
--CONTEXT: NITI Aayog CEO Subrahmanyam at an event in Delhi
--NITI Aayog CEO: Middle-income trap biggest threat to India's growth

NEW DELHI – The middle-income trap is the biggest threat to India's growth, NITI Aayog Chief Executive Officer B.V.R. Subrahmanyam said today. The government and its think tank, NITI Aayog, need to work together to formulate an economic growth strategy to avoid such a trap, Subrahmanyam said.

"Recently, the World Bank (came out) with this World Development Report where they talk about the middle-income trap," Subrahmanyam said at the 11th Annual Forum of the Public Affairs Forum of India. "Do nothing, no strategy, and you will fall into the middle-income trap."

The middle-income trap occurs when countries fail to transition from middle- to high-income status, stuck due to stagnant growth, lack of innovation, and outdated economic models. The World Bank in its report released last month had flagged that India and 107 other countries ran the risk of falling into the middle-income trap.

"...these countries will have to become more disciplined. They will have to time the shift from simpler investment-led growth strategies that worked well in the early stages of development to augmenting investment accelerations with intentional policies that aid the infusion of knowhow from abroad, and only then expend sizeable resources on innovation. Put another way, they will have to become more efficient in their use of capital – both financial and human – and labour and energy," the World Development Report said.

In order to avoid the middle-income trap, India needs to be more open to free trade and align itself with global value chains, Subrahmanyam said. "I think India has to be far more open to free trade, cut tariffs massively," he said.

The government is currently negotiating free trade agreements with several nations--the UK, the European Union, Australia, and Peru, among others. India has signed trade pacts with the United Arab Emirates and the European Free Trade Association in the recent past.

The Indian industry needs to start producing for the world, Subrahmanyam said. "Bulk of what India exports is not what the world wants." About 80% of India's exports target only 30% of international trade.

To align with global value chains, the government needs to focus on big-ticket sectors like electronics, chemicals, and auto components. The NITI Aayog is working with ministries and stakeholders to boost exports from such sectors, Subrahmanyam said. "We need to integrate with the global value chain. That's the future," he added.

"Don't get intoxicated by the size of the local market. That is the biggest threat I have seen in the future (for the manufacturing sector)," the think tank's CEO warned.

Besides this, the NITI Aayog has also been collaborating with states to address the regional imbalance in growth. "I think 90% of the (economic) reforms now have to be carried out by states. Take, for example, land, electricity, water supply – everything is in the states," Subrahmanyam said. End

Reported by Krity Ambey

Edited by Tanima Banerjee

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