China loss is India's gain; state governments could take the lead, says Arvind Panagariya

NEW DELHI: China's economic travails may be roiling global markets but they bode well for India, which should seize the opportunity offered by pressing ahead with reforms, Niti Aayog Vice-Chairman Arvind Panagariya has told ET.

Panagariya said in an interview that state governments could take the lead by framing industry friendly laws on land acquisition, while the Centre presses ahead with its efforts to bring in the Goods and Services Tax ( GST) legislation and undertake reforms that can be achieved by executive action.

He said in his view the developments in China and their knock-on impact were better categorised as 'turmoil' than as a 'crisis'.

Panagariya said this presented a huge opportunity for India.

"I see the development as being positive for India," said the former economics professor at Columbia University, who was appointed as the head of the Planning Commission's successor body by Prime Minister Narendra Modi.


"In principle, it can cut two ways. On the negative side, the slowdown can lead to a decline in the demand for our goods. On the positive side, China would be vacating a large chunk of space in the export markets. With our exports to China being small, the potential negative effect is small as well. But the scope for India capturing the export market is potentially huge," he added.

In saying this, he joins a growing list of influential Indian policymakers including Finance Minister Arun Jaitley, RBI Governor Raghuram Rajan and Chief Economic Advisor Arvind Subramanian, who have all this week sought to emphasise India's relative strengths and its capacity to weather the market meltdown.

Panagariya said India could fill the space China was vacating. "Our prospects remain excellent, especially with China being the source of the slowdown in the global economy. We can fill the space it is vacating," he said, striking a contrary note to the fears expressed by some commentators that a slowing China could even take India down with it. However, experts say this is easier said than done, noting that India faces several challenges, most notably a fractious polity that has put a spanner in crucial reform legislations.

The government's efforts to bring in a new law that could facilitate easier land acquisition by industry have all but been abandoned. The last Parliament session could not enact the GST legislation, putting question marks over its rollout planned from the next financial year. Panagariya said on land acquisition, states could take a lead, and urged them to follow the lead of Tamil Nadu which has worked out a creative pathway using the instrumentality of Article 254(2) of the Constitution.

"Given the logjam in the parliament, states could proceed in other areas on the state and concurrent lists as well," he said, suggesting two non-controversial areas with enormous potential include land leasing and digitisation of land records, both on the state list. As for the Centre, he said it must keep working on making progress on GST.

"It could also use the route of reforms through avenues that do not require legislative action," Panagariya said.