India could become the world’s leading growth story when the economic history of the second quarter of the 21st century is written, said economist Lawrence H. Summers, who played a key role in shaping the US government’s response to various episodes of global economic stress in India. has played. Recent history, including as Treasury Secretary in the Clinton Administration.
“I believe in India’s ultimate economic power,” Summers said in conversation with Mint editor-in-chief Shrutijit KK at the Hindustan Times Leadership Summit 2021.
Summers said he expects India to grow at around 10% for 15 years, helped by factors such as the rule of law, huge entrepreneurial energy, strength in digital technologies and a notable non-resident Indian diaspora. “I believe that unlike most countries in the world, it is possible for India.”
But there is work to be done.
“I believe this requires public policies that have historically been difficult in India. This requires a government that is not only energizing and reforming the economy, but also governmental strictures and reforms to the economy. Ready to de-control. It needs a sense of political stability.”
Summers has also served as Director of the US National Economic Council, Chief Economist of the World Bank, and President of Harvard University, where he is currently President Emeritus.
After the US Federal Reserve said it could accelerate the closing, or tapering, of liquidity support provided through an asset purchase program, Summers said emerging markets may not see a “taper tantrum”-like response. 2013, which influenced financial markets and currencies in emerging markets, including India.
“I think the world is a different place. I think whatever comeback or taper now will be the most widely anticipated in the history of the world. I think it’s telegraphed so loudly and so on.” There has been enough discussion that I would be surprised to see the immediate aftermath of a taper, the kind of scathing response we saw in 2013. If anything, the fears of 2013 have contributed to its persistence. for quantitative easing.”
Summers, which continues to flag the risk of higher inflation as a result of the large stimulus package in the US, is being seen as winning the intellectual argument against many economists as well as the US central bank, who backed the package and Argued that the effect of inflation would be transient.
The consumer price index in the US, a measure of inflation, is now at a 31-year high.
“I think in the US, we overdid … and supported income to the point where disposable income in 2021 was much higher than anyone expected before the advent of Covid. I think that’s what creates inflationary pressures.”
Summers said it was too early to know the economic impact of the Omicron version, but it was unlikely to have a major impact on inflation because it affects both supply and demand.
“It is important to recognize that because the omicron affects both supply and demand, it is unlikely to have a significant impact on the rate of inflation,” he said.
On regulating cryptocurrencies, a measure the Indian government is actively exploring, Summers said he advocates neutrality when it comes to looking at cryptocurrencies.
“Cryptocurrencies should be tested on an equal footing in the market. There should be no reason why laundering money should be easier with cryptocurrency than with cash. There is no reason to oppose blockchain instead of the more traditional payment rail . Equally, economic freedom requires the freedom to innovate and as long as that principle of neutrality is respected, there is no reason why I should use any technology I wish to fund you. I am not able to transfer.
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