International

China, India will drive Asian economy: ADB official

SINGAPORE: Bucking the current global trend of an “economic meltdown,” India and China “are not headed towards recession.”

In fact, “China and India will be the drivers for Asia, and Asia will be the driver for the rest of the world” in the new global context as well, according to the Asian Development Bank’s Managing Director-General Rajat M. Nag.

Despite these realities, “there will be, obviously, economic impacts both in China and India.” And, the ADB’s estimate was that “it may take, maybe four to six quarters, for the economies [of India and China] to rebound.” But neither country was “anywhere near in recession now,” Mr. Nag has told The Hindu. He was here to participate in the just-concluded thematic conference of the Singapore-based Indian Institutes of Technology (IIT) Alumni Association.

For China and India to be able to play their potential roles on the global scene, “it is very important that no country adopts any protectionist policies.” On the new estimates of growth, Mr. Nag said: “China grew at about 10.5 per cent over the last five years, average rate. This year, it will be certainly less than that, probably closer to 9.5 to 9.7; and next year, it will be lower still — eight per cent plus, 8.5 per cent, in that range. India grew at eight per cent over the last five years, 2002-2007. This calendar year, we expect it to grow at over 7.5 per cent; and next year, it will grow at over six per cent: 6.3 to 6.5. They are still fairly healthy clips, compared to the growth in the rest of the world, which is fairly anaemic. Some parts of the world might even go into a recession.”

“The de-coupling” of the economies of India and China from the larger global scene “was always a myth.” However, the steps now being taken by China and India in their own national interest could prove beneficial to other countries, including the developed bloc. Asked whether India and China should place any goodwill package on the international table, emulating Japan’s offer of $100 billion to the International Monetary Fund, Mr. Nag said: ““China is contributing to global growth by growing itself. China’s $586-billion domestic stimulus [package] will be positive not only for China but for the rest of the world [as well]. And, China has more fiscal space than India. [However] India has taken some fairly appropriate steps on monetary policy relaxation. The Reserve Bank of India has taken some measures at a very regular pace. I don’t think we should look at India [in terms of] what has it done to the international community, as distinct from what has it done to keep its own economy going.”

On whether any Asian country might now hit the path of a political free fall, like in the case of Indonesia during the financial crisis of the late 1990s, Mr. Nag said: “There have been talks already of expanding the Chiang Mai Initiative: $80-billion multilateral swap arrangements [covering 10 Southeast Asian countries, Japan, China, and South Korea].” On whether India would be invited to join the Chiang Mai Initiative now, he said “this will be something that the political leaders will have to look at.” Rejecting suggestions that an expanded Chiang Mai Initiative could be mistaken for an Asian monetary fund by another name, the ADB’s top executive said there was no contradiction between a global arrangement like the IMF and a regional arrangement such as this initiative.

Asked if the Group of 20, a forum of developed and developing countries, would become the new governing council for global economic matters, Mr. Nag said: “I wouldn’t put it in those terms. It will be very incomplete, if China and India and Brazil are not at the [global] table.”

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