India needs to continue its focus on reforms and review its policies towards health and education to sustain 8 per cent growth for the next couple of decades, said Gita Gopinath, Professor of Economics at Harvard University, noting that this will be the biggest challenge for policymakers.

“The political and economic institutions have to keep moving in a positive direction. It doesn’t have to be in big leaps and bounds, but even incremental steps will do,” said Gopinath, a co-chair at the India Economic Summit that was jointly organised by the World Economic Forum and Confederation of Indian Industry.

In an interview with BusinessLine , Gopinath, who is also financial adviser to Kerala Chief Minister Pinarayi Vijayan, said her role is to connect the state departments with global experts to help solve problems. Excerpts:

What is your role in the Kerala government?

I have an advisory role. When I am asked for inputs, I give that. I think probably my more substantial role is in trying to connect with people in Kerala, who may be interested, with knowledge leaders in the world. They can, in turn, help solve some of the problems that matter for Kerala

You have said India needs to grow at 8 per cent for a couple of decades? How will that happen given that our growth rate is projected at 7.6 per cent?

I am happy with the 7.6 per cent growth at present. The bigger question is whether you can sustain it at 8 per cent or more in the next couple of decades. For that, the political and economic institutions have to keep moving in a positive direction. It doesn’t have to be in big leaps and bounds, but even incremental steps will do.

What happens typically is that when elections come, priorities change and the focus on reforms moves to populist measures. That has to be stopped. The second focus area is that there has to be consistent improvement in health and education. In fact, some of the studies on education show learning outcomes have come down. That just won’t work. India can’t grow at 8 per cent on a consistent basis without fixing this. Also, governance has to improve.

The IMF has spoken about fragile global growth. How do emerging economies like India, with a large export market, deal with this?

If you are an economy that relies heavily on exports, the low growth in the advanced world would have negative effects in the short run. But these economies would need to re-direct it to the emerging markets because that’s where the growth is going to be. For a country like India, it is not just important to continue selling to the markets that it is selling to now, but to actually increase its share in world exports, which currently stands at just about 2 per cent.

Do you think the goods and services tax (GST) will be a game changer for the Indian economy?

I do think GST is quite transformational. There are these huge internal barriers for tariffs for moving across State borders, which have a huge negative impact on productivity, competitiveness and growth. GST is also much more easily collectible, which is an advantage. Enforcement of collection is much easier as it is a self-enforcing mechanism. That will be good for the fiscal balances of the States and Centre, eventually. In the short run, there could be a bit of uncertainty.

You have also spoken about the need to improve the outcome of skilling. Are campaigns like Skill India effective?

Skilling is one area where some researchers are looking at outcomes and finding that while there are lots of people who are joining and completing skilling programmes, it is not getting fully translated into getting and keeping jobs. We need to understand how to fix this problem. The returns to having high quality skills are very high.

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