If a prophet of doom says something positive, one must sit up and take note, more so if the comment is about India.
Nouriel Roubini, a professor emeritus of Stern School of Business, New York University — who earned the nickname “Dr Doom” after famously predicting the 2008 US subprime crisis — recently said India could realise a growth rate of 7% or even higher over the medium term with the right policy interventions, and its economy would likely expand at a faster pace than China’s over the next decade.
In 2022, Roubini said the world was staring at a “long and ugly” recession that could sink the stock markets by 40%. Given this comment, what makes him so positive about India? From where does his hope for India spring?
Below are some of his views from his recent talks and interviews that form the basis of his optimistic view of India's economy:
Population
Roubini says there is a good chance that due to its sheer size, India is going to be the most important country in the world over the medium to long term. "You have a population (that is) the largest in the world, young and growing – 1.4 billion people – which can, with good education and skills, lead to strong economic growth," he says.
Pent-up growth
The professor, who is often called a “permabear”, says India has a lot of pent-up growth that can be realised. "There is going to be a catch-up of growth. The growth per capita of India is only one quarter of that of China. With the right policy, growth can be potentially above 7% and that is going to lead India to become a very strong economic power."
A world power
Roubini also sees a pre-eminent role for India in the world which will, of course, help its economy too. "The country is also going to become a major geopolitical power, both in Asia and globally, given the size, its role, and the fact that you need a strong power to manage the relation also with a rising China," he says.
Democratic edge
India has done quite well as a democracy, says Roubini. "While democracy is more messy, you get much more consensus for your policy choices if it is through a political process where you can convince people of the right reforms, because reforms may take longer and occur more slowly but they become more sustainable and more resilient over time and that is why a strong, vibrant democracy with a market system and the provision of public services or variety of variety of things to the middle class and the poor is the right economic approach.”
India stack is the best
The economist points out that India's unique achievement in building public digital infrastructure such as the UPI, Aadhaar and BHIM will help it grow better. "Your tech stack allows lots of different apps and tools to provide a variety of financial services, public services, ecommerce. I think that the Indian model is better than the Chinese where the government controls all the data, or the US where a bunch of oligopolistic big tech firms control the data," he says.
The rise of the rupee
"One can see how the Indian rupee could become a vehicle currency for some of the trade that India does with the rest of the world, especially South-South trade. It could be a unit of account, it could be a means of payment, it could become a store of value. Certainly, the rupee over time could become one of the variety of global global reserve currencies in the world," Roubini says.
Read Roubini's fine print too
However, his optimism about the Indian economy comes with a few disclaimers. For one, he does not see more than 8% growth for the country unless many more economic reforms that are structural are introduced. Maintaining a high level of growth for a long time, say two decades, depends on such government policies.
Roubini, who has said he is “Dr Realist rather than Dr Doom”, also warns that India has to become much more open to big foreign companies to achieve the vision he sees for the country. “The growth of India is becoming increasingly driven by national champions that are large, private conglomerates. On one hand, that might be seen as a positive because they are productive, efficient, and competitive. However, eventually, they can potentially hamper competition, kill new entrants and startups. And they may eventually lead to lower total factor productivity growth,” he adds.
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