ET GBS 2017: Investment-led growth in India part of the new world order, says Andy Xie

NEW DELHI: Investment-led growth in India and consumption-led expansion in China will make up the new world order, economist Andy Xie said, even as he cautioned about uncertainties.

With the West in political turmoil and becoming less and less open, the emerging economies should form a free trade bloc, he said. "Emerging economies looking to sell to the West, that strategy will not be effective anymore ... West will stagnate for a long, long time," Xie said on the second day of the Global Business Summit.

China needs to pursue consumption-led growth and pressure from the US could force the country to make the change, said the former economist at Morgan Stanley and the World Bank. "I think Donald Trump is not so bad. If he puts pressure on China it could be a catalyst for change.

They had to change to join the World Trade Organization. Now Trump could be very good. He could do something crazy and that could be a catalyst for change in China," he said. While China thrived on its export-led model, Xie said that model no longer exists. "Emerging economies have to form a free trade bloc. Because there is less pressure as cost model is the same for them, there is more justification for free trade," he added.

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Terming monetary stimulus as a "poison", he said: "It is like a drug; it is like cocaine. You feel good for a short period of time but your health goes down. Any country talks about monetary stimulus will go down.”

Countries that want to rise must have a hard currency policy, he said coming hard on devaluation of currency. If incomes have to rise, the currency must become stronger, he added, pointing to the sharp difference in per capita income in the US and China.

For the long term, Xie said those who look after their employees are stable but those with short-term profit motive are in a lot of trouble.