IF ANYONE needed verification that India is on a different trajectory to the rest of the economic world, it was provided on Friday.
When it comes to India, even Nouriel Roubini is an optimist.
Speaking ahead of Prime Minister Narendra Modi at the Global Business Summit in New Delhi, Dr. Doom voiced caution over a slowdown in credit growth, retroactive taxation, red tape and the need for reform on bankruptcy laws.
And yet, he acknowledged, India has achieved robust growth at over 7% while tighter monetary policy has brought inflation under control, and fiscal adjustments and no small amount of luck with low oil import costs have improved the twin deficits in the current account and budget.
On top of all that, enthused Roubini – in contrast with China – India’s “real positive is a vibrant democracy” where decision makers debate and policy is more transparent. “I’m quite confident that the direction India is going in is going to be successful in the next few years.”
India recognized its opportunity. The following day at the summit, the government’s chief economic adviser, Arvind Subramanian, hosted a “fireside chat” with Roubini.
Keeping up the charade of intimacy in front of an audience in the hundreds and international media, Subramanian recollected the last time he’d shared a platform with the professor. Roubini had been predicting a crisis in India.
True to form, Roubini countered that there are still concerns that “things are not as strong on the micro level as on the macro.” But the potential for India is to reach 8 or 9% annual GDP growth.
“For someone who is known more pessimistically as Dr. Doom, we are very pleased that we have an upbeat prognosis,” responded Subramanian.
The truth is, it would be hard even for the world’s most notorious skeptic to deny the momentum in India, with growth at a faster pace than any other major economy.
But India isn’t the only economy receiving positive Roubini vibes. The professor also sees a brighter side to key aspects of the global economy fretted over by those who are just catching up with his pre-2008 cynicism.
“China is not going to have a soft landing nor a hard landing,” says Roubini, but the economy will bump along at 6% and then 5% growth. “That means a severe financial crisis won’t occur.”
“While many risks are there, things are not going to be so bad,” said Roubini.
It seems either Dr. Doom needs a new name – or we all need to cheer up.
3 February 2016