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India Will Benefit From Donald Trump's Protectionist Measures, Suggests World Bank
South Asian countries in particular India need not worry much from potential protectionist measures from the US and other developed nations as such a move is bound to benefit them and open up new vistas of opportunities, a top World Bank official said
Photo Credit : Reuters
South Asian countries in particular India need not worry much from potential protectionist measures from the US and other developed nations as such a move is bound to benefit them and open up new vistas of opportunities, a top World Bank official said on Sunday (April 16).
"We remain optimistic that South Asia is the fastest growing region in the world. We believe that even if there are mounting protection pressures (from the West) they will not affect South Asia too much. If anything, they may provide new opportunities," World Bank South Asia Region Chief Economist Martin Rama told PTI in an interview.
"In light of the recovering advancing economies we strongly believe that South Asia should continue to look outward and not to think about an inward oriented growth strategy," Rama said as the World Bank released its report 'Globalisation Backlash' of its latest twice-a-year edition of South Asia Economic Focus.
The report, released ahead of the annual spring meeting of the International Monetary Fund and World Bank, says that South Asian countries could even benefit from the backlash against globalisation. It also confirms that South Asia remains the fastest-growing region in the world, gradually widening its lead relative to East Asia.
Rama said the report tries to address the concerns that South Asian nations would be hit by potential protectionist measures from the US and European nations post-Brexit.
"We hear voices that say, 'Oh, South Asia should basically look inwards.' That's what this report tries to address. What it tries to do is, it doesn't forecast what will happen with trade policy in advanced economies. It has hypothetical scenarios. If trade policy was to go in this direction, what will happen to South Asian countries? If it was to go in this different direction, what will happen? That's what it does," he said.
If indeed there are protections, it will be more expensive, especially in the US, to import goods from other parts of the world - China, Mexico perhaps.
"We are at the point where advanced economies see growth accelerating. We may have these two forces that may play in opposite direction, trade barriers that make it more difficult to export, more growth and make it easier to export.
"And where we come out is in a very negative scenario, where there will be protection across the board. It will not be too good for South Asia, but it will not be devastating, because the effect of the tides will not be too high and because the faster growth in advanced economies will have settled," he said.
Rama said the report talks about hypothetical scenarios as to what would happen to countries in the region like India and Bangladesh if the US and other nations adopt protectionist measures.
Noting that countries like China and Mexico are likely to be badly hit by such protectionist measures, the top World Bank official said that countries like India and Bangladesh could fill up some of the space created by it.
"There will be trade diversion. South Asian countries could be taking some of this space for exports that others will be facing difficulties with," he said, adding the report says that it is not advisable for South Asian countries to give up on the idea of pushing for exports or pushing for global integration.
"In fact, if this scenario where there is different degree of protections with different countries material, if in the country, South Asia was to diversify its exports, it could gain quite a lot," Rama asserted.
However, the report does not cover the issue of H-1B, which of late has emerged as of utmost importance for India.
Indian companies believe that Indian would be badly hit if the US adopts a protectionist approach on H-1B visas.
"That (H-1B) is an important issue. It's not among the issues we cover in more detail in these reports. We refer to it. But the impression is the following, is that..., anything that is barriers to trade, barriers to mobility, we don't think it's good for development," he noted.
"But if highly qualified people from India cannot go to work in the US, there may be firms that come to India to work with them. Capital and labour have to be together. If labour cannot go where the capital is, capital may come where the labour is," Rama said.
The first of its kind of report - based on a survey of a group of 200 economists from the region - recommends South Asian nations to diversify their export basket.
"The main message is, try to diversify exports, try to have an elastic response so that you seize the opportunity when it arises. These are policies that have to do with infrastructure, with logistics, with the business environment, with the kind of things that help the private sector move in that direction," he added.