TOKYO -- India's low levels of debt, its entrepreneurial, market-driven economy and competitive wages mean it is well-placed to become an engine of global economic growth and draw manufacturing away from China, Indian Finance Minister Arun Jaitley told the Nikkei Asian Review.
"If India continues to maintain its high growth trajectory, which I'm sure over the next few years it will, its potential to be a growth engine is real," Jaitley said in an interview during the 22nd International Conference on The Future of Asia, organized by Nikkei in Tokyo. Earlier, he said in a speech to the conference that the world is "looking for other shoulders to rest growth on" as China slowed.
The Indian minister pointed out that his country had grown more than 7% a year for the past two years, making it the world's fastest-growing major emerging market. It could do even better this year, helped by a better monsoon season, he added in the interview. The main risks to that rosy scenario are a global economic slowdown and a sharply higher oil price.
However, China's economic slowdown is not affecting India directly because it is not part of the Chinese value chain, Jaitley said. Furthermore, increases in Chinese wage levels have opened up an opportunity. "Global buyers and supply chains are also looking for alternative manufacturing hubs. And therefore, if we can emerge as a good, low-cost manufacturing hub, I think it can act to our advantage." Footwear and clothing are two of the most promising sectors, he added.
Indian Prime Minister Narendra Modi's government has just completed two years in power, winning praise from experts for speeding up reform. In recent state elections, his Bharatiya Janata Party scored an emphatic win in the northeastern state of Assam, dislodging the Indian National Congress, which had ruled there for 15 years. The BJP also improved its vote share in the country's south and east, expanding its influence beyond its strongholds of the north and west and creating a favorable political climate for further economic reform.
Jaitley summed up "Modinomics," as the prime minister's economic policy is known, succinctly: "I think there is a significant difference in decisiveness, in policy direction, and in quick implementation."
India's economy boasts some important advantages over its big competitors, since it is driven primarily by private-sector growth, in contrast to China, and has much lower levels of debt, the minister said. "Being entrepreneur-driven and market-driven, rather than only state-driven is a better model," he stated.
India is hoping to privatize a total of 565 billion rupees ($8.4 billion) of state assets over the next year. Last year, only one-third of the sales target was reached but Jaitley said better market conditions and new mechanisms, such as allowing companies to buy back government shareholdings, would make it easier to hit the target this year.