Modi has changed investors’ perception of India: Takehiko Nakao

                                                                       

 India must explore new means of resource mobilization to rev up its public investment in areas such as infrastructure, education and health to sustain its growth momentum, said Asian Development Bank president Takehiko Nakao. Nakao, who was in India to attend the Advancing Asia conference jointly organized by the International Monetary Fund and the finance ministry, said India must make efforts to integrate to the regional value chains in the East Asian economies. Edited excerpts:

How do you think the increasing uncertainty in the global economy will impact India’s growth?

Of course, overall the world economy is slowing down. There is a lot of discussion regarding China slowing down. But it reflects more structural issues like low labour force increase and higher wages. Migration from the rural area to the urban area is now coming to an end. The government is also targeting a new normal, which pays as much attention to environmental and social issues as to growth. It also reflects overcapacity in some areas. China also has room to grow further by focusing more on consumption than investment and on services sector rather than on manufacturing. We are expecting China would not hard land. Commodity exporting countries to China may face some slowdown. But at the same time, because of higher wages in China, some countries like Myanmar, Cambodia, Vietnam, Bangladesh can even take some advantage. Those countries are growing very steadily at 6-7%. India’s economy is not so tightly connected to China. Of course, there is an influence. Indian economy is growing very steadily and we expect more than 7% growth in coming fiscal year. We hope India’s growth will support regional economy and global growth.

So, you expect India’s economic growth to remain robust in the coming years as well?

I really hope so because it is supported by policies. Macro-economic situation has been very stable. There was concern about current account deficit, fiscal deficit and exchange rate depreciation in Indian and other emerging economies after US Fed chairman Ben Bernanke announced tapering of quantitative easing in 2013. But Indian economy has been very stable even after the Fed started increasing interest rates. Growth has been stable, inflation has been managed, foreign exchange reserve is increasing, current account deficit is minimal and fiscal deficit is declining. So, Indian economy is stable. And I think, based on the reform efforts like inviting more foreign direct investment, deregulation and budget proposal for investments in rural and in infrastructure sectors will boost growth.

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