India’s objections to the One Belt One Road (OBOR) initiative have not been only about the China Pakistan Economic Corridor (CPEC) passing through Pakistan-occupied Kashmir (PoK), but also about the economic viability of the project. A statement by the Ministry of External Affairs (MEA) last week had said the OBOR would create “unsustainable debt burden for communities”. However, Sebastian Vergara, Economic Affairs Officer at the United Nations’ Department of Social and Economic Affairs (DESA), says the project would benefit Asia, in an interview with National Herald.
Do you think China’s OBOR initiative would stimulate economic growth in the region?
The One Belt One Road (OBOR) initiative is a positive development for Asia, which will lend a renewed momentum to the region’s economic growth. The project will go a long way in unlocking investment opportunities in the region and spur region’s economies. It will help stimulate Foreign Direct Investments (FDIs) and bilateral trade in the participating countries. But countries would need to reduce bureaucratic procedures and adopt common standards in order to materialise these potential benefits.
Does it serve India’s economic interests well to be part of the OBOR initiative?
We are aware of India’s territorial concerns regarding an OBOR project passing through the disputed Kashmir region. We think it won’t be appropriate for us to comment on India’s involvement in the OBOR, since it is a sovereign decision.
How do you view the phenomenon of ‘jobless growth’ in India?
The economic situation in India is largely positive. Sound macro-economic policies by India have made it the fastest growing major economy of the world. As far as jobless growth goes, we are seeing similar problems in other countries too, so India is no exception. Technology is one of the primary reasons behind countries not being able to create enough jobs.
Obviously, the problem in India is more challenging than other countries due to its large youth population who are entering the workforce every year. To break this cycle of jobless growth, India needs to continue pursuing its business structural reforms that it has been undertaking over the years. The government needs to develop sound labour market policies, and emphasise on training and education of workers. Education is crucial to break the cycle of jobless growth.
In a recent paper, you stated that productivity growth was directly linked to international trade. What’s holding back productivity growth in India?
While the economic outlook in India remains largely favourable, there is still scope for improvement. For instance, India needs to attract more private investment, which can be triggered by increased public investment in large-scale projects. And like jobless growth, the lack of productivity growth has not been limited to India. Several factors such as subdued global demand, uncertainty in global economy and lack in private investment have contributed to this.
However, achieving productivity growth must be a government policy priority if India wants to continue to grow above 7%. India must encourage public private partnership (PPP) projects in key sectors, especially infrastructure. Business structural reforms should be vigorously pursued. The health of the public banking sector is a big worry for India, and the government needs to tackle the level of debt with sound policies.
India really has the potential to grow at over 7% for the next 20 years if it can meet these challenges.