India must focus on exports to achieve a 10% growth rate for the economy, said Arvind Panagariya, chairman of the Sixteenth Finance Commission.
“I’ve looked at successful countries such as Hong Kong, Singapore, Taiwan, South Korea, China, and India – these are the six high-growth examples. My conclusion is very clear – countries that have been open are the ones that have grown rapidly,” Panagariya said.
The former vice chairman of Niti Aayog further highlighted that the country needed to follow China’s strategy to increase its per-capita income and wean away from idea of import substitution.
“Even if we can capture the global market for a few products, that’s it! We don’t have to do anything else. That really is the China story – it acquired a very large share in certain products. And that gave China such a huge boost; for 3-4 decades, it grew at 10% a year,” he pointed out, noting that the global export market, at $32 trillion in 2022, was almost 10 times India’s GDP.
India’s GDP is expected to grow 7.3% in FY24, as per first advance estimate released in January. The IMF expects Indian growth to ease to 6.5% over the next two fiscal.
Panagariya cited the South Korea example, where growth dipped 2-3 percentage points once the country succumbed to the temptation of import substitution.
“I fear that in our (India’s) case, exiting this new phase of import substitution will be a challenge,” he pointed.
In a conversation with the Foundation for Economic Development, he also argued for states to create a favourable environment for labour-intensive industries.
“I think that to me is the single most important policy objective that states ought to be pursuing, particularly the larger states agriculture still dominates very heavily…And to do that, I have championed, creating special zones,” he said.
Panagariya also noted that the lack of reforms in manufacturing also has held back from the growth rate going to 10%.
