ET GBS: India has potential to grow above 8% if reforms are accelerated, says Nouriel Roubini

In a discussion with Arvind Panagariya, NITI Ayog Vice-Chairman during ET Global business summit, American economist Nouriel Roubini said that India has the potential to grow above 8% if the reforms are accelerated.

When Panagariya asked Roubini to present his view about the fall in exports in India, he said that three factors are behind for the current decline export.

"The global growth has been slowing down. This is something that affects every country in the world not only India. The second factor is that many currencies around the world have fallen in value. Other currencies have fallen more in value than India. Thirdly, in China there is massive excessive capacity in steel, cement, aluminium and of industrial manufacturing goods. There has been some dumping of this excess capacity to other parts of the world like Europe, US and also to India", he said.

He added that export reforms in India has been disappointing compared to other emerging markets.

Speaking on National capital flows outlook for India, Roubini said that the degree of openness of exports and imports of India is larger than big economies like US. The capital accounts liberalisation India has been more cautious for number of reasons including bond inflows. The banks are financing the fiscal deficit, because of that there are some constraints. So, there is more to be done.

Roubini said that one of the reasons why China wants to maintain growth rate above 7% is not just prestige but they are worried about FDI going to India. Roubini said, "Chinese are concerned that investment bankers would go to India rather than China."

When Panagariya asked Roubini's views on how change in demographics and labour supply in China would affect India, Roubini said that low labour cost, large domestic and global markets can attract industries to India. He cautioned that reforms are going to be the key factor to encourage investments. He said, "Many of the companies are concerned about retrospective tax, good infrastructure, and in India acquiring land is complicated."

He said that land and labour reforms at the state level can help in bringing in more investment if not at the central level.

Panagariya added that such reforms are already happening in states like, Gujarat, Rajasthan, Madhya Pradesh , Andhra Pradesh and Tamil Nadu.

Nouriel Roubini concluded saying, " There are global headwinds coming; the global growth is anaemic; there is slowdown in China, in some emerging markets; oil prices are falling. In spite of that India has been able to still grow at 7% plus and that's a positive. If they continue with the pace of reforms, the potential growth can be much higher than 7% or towards 8% or 9%."