Export-led Growth Model, which flourished earlier, is at disadvantage Post-Global Financial Crisis of 2008: Dr. Arvind Virmani, Former IMF Executive Director
The export-led growth model for countries, which flourished in earlier years, is at a disadvantage now post the Global Financial Crisis of 2008, according to Dr. Arvind Virmani, Chairman of the EGROW Foundation and the Policy Foundation.
“India is now the fastest growing large economy. This is based on International data from the World Development Indicators (WDI). After the Global Economic Crisis, China’s growth slows down the most, confirming that export-led growth model is no longer viable in a world of DE- globalization. India is a notable exception as growth accelerates marginally after the crisis,” he said.
Dr. Arvind Virmani, also the President of the non-profit Chintan, was delivering the ‘New India Manthan’ leadership lecture on ‘India in global Perspective’ at Indian Institute of Technology Madras today (6th March 2019). He was earlier Executive Director, International Monetary Fund (IMF) and Chief Economic Advisor, Ministry of Finance, Government of India, and Principle Advisor, Planning Commission.
Speaking about the global financial crisis of 2008, he said that it marked a divide in the global economy. Two aspects of growth are demand and supply. Before the crisis, there was a lot of demand because of infusion of cheap credit, which resulted in supply driving the demand. After the crisis burst, the aggregate demand collapsed.
After the economic crisis, growth favoured countries with strong domestic demand such as India which chose policies that were driven by domestic policies rather than exports.
Further, Dr. Arvind Virmani said, “Vietnam and India will be among the major gainers from the U.S.-China tariff disputes. The tariff wars between the U.S. and China will result in trade diversion (with importers looking to other countries such as India and Vietnam), Foreign Direct Investment (FDI) risk and supply chains.”
India is the only large country in which Incremental Capital Output Ratio (ICOR), considered a proxy for excess capacity, remains unchanged suggesting that the slowdown in investment was enough to balance domestic capacity with demand, he concluded.
Dr. Arvind Virmani is also the President of Forum for Strategic Initiatives (FSI) and is a Mentorb(economic policy) to Federation of Indian Chambers of Commerce and Industry (FICCI). He was member of Reserve Bank of India (RBI) Technical Advisory Committee on Monetary policy during 2013, 2014; 1st half of 2016.
Dr. Arvind Virmani has also served as Member, Telecom Regulatory Authority of India (TRAI) and also directed the Indian Council for Research on International Economic Relations (ICRIER) as its Chief Executive. He has published 33 journal articles and 20 book chapters in the areas of Macroeconomics.