World Bank president Ajay Banga says the country needs to push itself to speed up manufacturing for getting a part of the Chinese pie
India is perfectly positioned to cash in on the opportunity offered by the post-pandemic Chinese economy to build itself up as a manufacturing alternative hub in the wake of growing and expanding global supply chains. World Bank president Ajay Banga believes India has a three to five year window to make the transition.
Banga said India is more resilient and provenly so after the pandemic, which has resulted in renewed optimism in its economy among other countries. With the focus remaining on growth and job creations as part of the efforts to reduce overall poverty, the country stands a good chance to make an impact in manufacturing, as it has done with services.
India needs to be quick to cash in
Banga, who was formerly the CEO of Mastercard, took over as the president of the World Bank last month. The official warned that India should push forward with reforms and quickly utilize the opportunity presented by the China+1 initiative. This isn’t going to be open for a decade and if India doesn’t go forth, other geographies would join this race, he added.
On a visit to India, Banga held discussions with several government ministers and officials out of which China+1 was a key part. Incidentally, the China+1 alludes to the setting up of manufacturing facilities in other geographies to address supply chain disruptions risks from within the Chinese territory, as had happened during the pandemic.
Make in India initiative is a positive step
India is going after a very high percentage of GDP coming from local production, the WB president said referring to the government’s Make-in-India program. “Your exposure to the typical impact of global slowdowns, caused by trade slowdown,… is cushioned by the relatively high percentage of the economy that comes from domestic consumption, which is very helpful at a time during these times,” he said.
The country posted 7.2% growth in GDP during FY23 and the World Bank expects it to grow a further 6.3% during FY24, which may be lower than a year before but shines forth at a time when most of Europe and North America is witnessing recessionary pressures amidst high inflation and growing interest rates.
The target should be to generate more jobs
Banga said policy planners in India should continue the growth momentum as this is the only way it can tackle poverty. He referred to the demographic dividend and noted that job generation to the tune of 15 to 20 million is a must. A good chunk of this should come from manufacturing and technology while a good chunk will continue to come from services.
The gains around poverty reduction across the world received a setback due to the pandemic and are now facing pressures around climate change, fragile economies, wars and the general high debt scenario playing out. “The best way to drive a nail in the coffin of poverty is growth and jobs,” he said, adding that he was more optimistic now than earlier.
While noting that forecasts are not destiny, Banga said there is more downside risk on the global economy today in terms of slowdown over what we saw early in the year. He also sought private capital investments to assist global efforts on renewable energy funding, which is estimated to be in the range of $1trillion for achieving net-zero targets.
“The fact remains we will need different forms of concessional capital. “We will also need different forms of multilateral bank capital and government capital and philanthropy capital to take first-risk positions or help enable the blended finance to come through,” Banga said while noting that an evolution roadmap around hybrid capital has been presented to all nations.