Vimarsh: Talk on ‘The State of the Economy : India and the World’, by Sh S Gurumurthy, at the Vivekananda International Foundation (VIF), 15 November, 2018

Welcome remarks by Dr. Arvind Gupta, Director VIF

Respected Sh Gurumurthy Ji, Distinguished Members of the Audience, Members of the Media, Ladies and Gentlemen,

Welcome to this edition of the Vimarsh lecture series by eminent persons. Vimarsh has emerged as a premium platform of interaction on issues of national interest. I would like to thank you all for supporting this platform.

Today we have with us Sh S Gurumurthy who has taken time from his busy schedule and come all the way from Chennai to talk to us on the ‘State of the economy : India and the world’. Sh S Gurumurthy is an eminent economist, Chartered Accountant and Investigative Journalist. He has been consistently figured in the “most powerful person” list of the ‘India Today’ for several years. In 2017, the Magazine had ranked him as 30th most powerful person. He also edits the popular Tamil weekly Tughlaq. One of the Founder member of the Vivekananda International Foundation, Gurumurtyji is the Chairman of its Board of Trustees.

An original thinker, a staunch nationalist, Sh. Gurumurthy has long been an advocate of an Indian model for economic growth. He has been a crusader against black money and a strong votary of de-monitisation. An eloquent speaker, Sh Gurumurthy lectures regularly at IITs, IIMs, universities and other fora. His thought-provoking lectures are much appreciated. This is evident from the like to the videos of his lectures on You Tube and social media. He is in the visiting faculty of IIT Bombay and the Distinguished Professor of e Legal Anthoropology in Sastra University.

Friends, global political and economic conditions are highly volatile. Trade wars, rising protectionism, geopolitical tensions, the impact of sanctions, high oil prices, higher interest rates in the US, appreciation of dollars jeopardise global economic growth. Rule-based trading order is under stress. Geopolitics is closely intertwined with the economic situation. The rising rift between Russia and the US, between China and the US, unending wars in the oil-rich Middle East, and deteriorating nuclear and missiles environment are some of the factors that have a major impact on global economy. Global supply chains are vulnerable to disruptions of various kinds.

Globalization has assumed negative connotations. People are concerned about rising income disparities among and within countries. Narrowly based identity conflicts are becoming common. The International Monetary Fund’s (IMF) World Economic Outlook growth projections have been revised down for the euro area, Japan, and the United Kingdom. The difficulty in reaching a deal on Brexit has also created uncertainty.

India is not immune to these risks. Indian economy is closely linked to global economy. Foreign trade accounts for nearly 40 percent of India’s GDP. India is recipient of over $70 billion in remittance from abroad. India imports huge amounts of oil, natural gas and coal to meet its energy needs. Millions of Indians are working abroad. These factors make India sensitive to global, political and economic trends. In particular, high oil prices have resulted in higher import bills for oil and a depreciating rupee.

The good news is that Indian economy has weathered these headwinds. India is now the 5th or the 6th largest economy in the world. Growth projections are healthy at above 7 percent. Inflation is low. The slide in rupee has been halted. The negative impact of demonitisation and GST on economic growth has proved to be temporary. Tax base has been widened. Tax collections have been buoyant. Digtialisation of the economy is growing apace. These will have a long-term positive impact on the economy. FDI has increased. India’s global ranking in Ease of Doing Business index has improved significantly. However, significant risks remain.

Global conditions are highly volatile and are likely to remain so. The Current Account Defict (CAD) remains high and needs to be managed adroitly. High oil prices will have a negative impact on the balance of payment and CAD. India’s foreign trade needs urgent atention. Balance of trade with China is unsustained. The import of electronic items has increased sharply and is now second only to oil imports. India needs to invest more in R&D and become self reliant in strategic technologies. India will need a sharp push to exports; this will require a concerted effort. India’s competitiveness in global markets will have to improve. The Non-Performing Assets problem will need to be sorted out as soon as possible. Ways will have to be found to deal wit the US sanction. Sanctions could have a negative impact on India’s economy.

Speaking at Davos at World Economic Forum, PM Modi has warned against the rising tide of protectionism in the world. His exhortations for Sabka Saath, Sabka Vikas (Security and Growth for All) apply to global context as well. India is a large economy with large global fotprint which is likely to grow even bigger in the future. At the Regional Comprehensive Economic Partnership (RCEP) Summit in Singapore, Prime Minister Modi has called for a balanced free trade agreement among 16 countries

I now request Sh Gurumurthy to share his thoughts with us.