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Jagdish Bhagwati on India’s Future: Trade, Growth, and Development
Context:
Renowned economist Jagdish Bhagwati (90) is preparing to retire this academic year after a 65-year-long career in research and academia.
More on News:
- In an exclusive interview, Bhagwati shared his thoughts on key issues such as trade protectionism, India’s ambition to become a developed country, the middle-income trap, and the demographic dividend.
- He also reflected on his differences with contemporary economist Amartya Sen.
On Current Government:
- He expressed satisfaction with the current government, noting that while a functioning democracy needs an Opposition, India’s current opposition is weak.
- He acknowledged that within the current coalition, some opposition does exist, which is beneficial for governance.
Policymaking in a Coalition Government:
- Bhagwati dismissed concerns that leading a coalition could hinder policymaking.
- He praised the current government’s initiatives, particularly those focusing on women’s issues, and the role of women leaders in his Cabinet.
On Global Trade Protectionism:
- Bhagwati views the current wave of global protectionism as temporary.
- He believes that, in the long run, most nations will recognise the benefits of an open economy.
- He and fellow economist Arvind Panagariya have long advocated for the benefits of industrialisation and open markets, and Bhagwati sees the broader acceptance of these ideas in India.
Growth vs. Development Models:
- Bhagwati reiterated his belief that economic growth should precede income redistribution, criticising models like Kerala’s, which prioritise development first.
- He argues that rapid growth and gainful employment are the best long-term solutions for poverty and inequality.
India’s Path to Becoming a Developed Nation by 2047:
- According to Bhagwati, India does not need to focus on specific sectors for growth.
- The country has the skilled manpower and investment interest needed for general growth.
- He urged policymakers to provide incentives and allow the economy to evolve naturally, without the government dictating where to invest.
On India’s Growth Being on “Autopilot”:
- Bhagwati believes that India is now on the path to becoming a developed nation, comparing the country’s entrepreneurial landscape favourably to the United States.
- He noted that India no longer needs to rely on foreign expertise, as it has entered a new era of self-reliance and opportunity.
Concerns Over the Middle-Income Trap:
- Bhagwati dismissed the concept of the middle-income trap as a statistical artefact, labelling it as a misguided concern propagated by organisations like the World Bank and IMF.
- He argued that India simply needs policies that promote growth and local entrepreneurship.
Making the Most of India’s Demographic Dividend:
- Bhagwati emphasised the importance of rapid economic growth to absorb India’s large young population into the workforce.
- He also highlighted the need for improved quality in higher education, pointing out that India’s premier institutions, like the IITs and IIMs, are not highly ranked globally.
India’s Protectionist Measures:
- Bhagwati criticised India’s recent protectionist policies, stating that they are unnecessary even in the face of rising protectionism in the West.
- He argued that India should maintain an open trade policy regardless of what other countries do, as this would ultimately benefit the country.
Sen-Bhagwati Debate
The debate between Amartya Sen and Jagdish Bhagwati represents a significant intellectual clash regarding economic policy in India, particularly around the themes of growth, social welfare, and development strategies.
Key Points:
- Philosophical Foundations: Amartya Sen advocates for a model that emphasises social infrastructure, arguing that investments in education and healthcare are crucial for enhancing productivity and fostering sustainable growth. He believes that social equity lays the groundwork for economic progress. Jagdish Bhagwati, on the other hand, champions a growth-first approach, asserting that rapid economic growth generates the resources necessary for social investments. He contends that while growth may initially increase inequality, it ultimately provides the means for redistribution.
- Context and Evolution: Sen co-authored An Uncertain Glory: India and Its Contradictions, while Bhagwati collaborated on Why Growth Matters, each presenting their respective arguments about India’s economic trajectory.
Differences with Amartya Sen:
- Bhagwati acknowledged his long-standing disagreements with fellow economist Amartya Sen, calling them inevitable among leading intellectuals.
- He said that rivalries and differences are part of the academic process and remain unresolved.
In conclusion, Bhagwati is optimistic about India’s future, particularly in terms of its economic trajectory and the potential to become a developed country. He remains critical of protectionist policies and advocates for continued growth and entrepreneurship to achieve sustainable development.