Roubini cited three factors for this optimism while speaking at the Economic Times Global Business Summit on Friday.
“First, India’s population is now the largest in the world and it is young and growing–that’s a source of high potential growth,” he said. “Second, per-capita income is still much lower than China’s. With the right policy, potential growth could be 7% or even higher. Third, India is also going to become a major geo-economic and geo-political power.”
The country has undertaken several policy reforms to bolster infrastructure and the internal market, leading to growth in manufacturing, Roubini said. At the same time, it has retained its prowess in IT and technological services, including fintech. Plus, India has been growing fast, even with a much lower investment rate than China, because of better efficiency.
While these positives are commendable, India’s challenges over the next few years are going to be “more micro and structural, rather than macro and cyclical,” Roubini said.
“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,” he said. “However, eventually, they can potentially hamper competition, kill new entrants and startups. And they may eventually lead to lower total factor productivity growth.”
Growth is not picking up in the desired manner–it’s either stagnant at around 6-7%, or falling, which requires attention, he said.As for the global economy, while the International Monetary Fund (IMF) has a less gloomy view than six months ago, Roubini flagged “interconnected threats.”
These not only imperil the global economic and financial future “but also the future of humanity and the future of the planet,” he said. “In the short run, the kind of risks that we have to face are those of inflation, potential recession, stagflation, and mounting debt ratios that are becoming unsustainable.”
Medium-to-long-term, negative-aggregate supply shocks can squeeze growth and inflate the cost of production. Risks include de-globalisation, reshoring or friend-shoring, ageing populations in advanced and emerging economies, curbs on migration and reduced wages, he said.
On top of these challenges, global climate change and cyber warfare as well as the backlash against rising income inequality also pose risks to the global economic landscape, he said.
The IMF last month said it’s expecting some slowdown in the Indian economy in FY24 and projected the country’s growth at 6.1%, compared with 6.8% this fiscal. However, it stressed that India remains a bright spot, as global growth is expected to fall from an estimated 3.4% in 2022 to 2.9% in 2023 before increasing to 3.1% in 2024.
“India remains a bright spot. Together with China, it will account for half of global growth this year, versus just a 10th for the US and euro area combined,” the IMF had said. “Global inflation is expected to decline this year but even by 2024, projected average annual headline and core inflation will still be above pre-pandemic levels in more than 80% of countries.”
Roubini said artificial intelligence (AI) presents an opportunity but warned that it can turn into a threat if not managed properly.
“There is a dark side to this technology innovation that could eventually be permanent–massive technological unemployment among low-and medium-value added blue-collar and white-collar workers,” he said.