The old global economic order is crumbling and India, which was on the periphery of the old architecture, is more likely to gain than lose from the emerging new world order, said T V Somanathan, Finance Secretary, Government of India.

“We can be a global economic power only by becoming a powerful domestic economy and a cohesive and peaceful society,” he added. 

He was delivering the XVI CUB Shri V Narayanan Memorial Lecture on the topic, ’India in the emerging global economic architecture’. The annual lecture series in the memory of Late V Narayanan, a veteran banker and the longest serving Chairman of City Union Bank (CUB) under whom the bank witnessed phenomenal growth. He passed away in 2004. 

“If India wants to truly play a significant role in shaping the emerging global economy, the most important challenge, ironically, lies in the domestic front,” Somanathan said, adding, “we cannot shape global order, if we do not have a strong domestic economy.”

Four key steps

He highlighted four important steps to make the domestic economy stronger which includes prudent and conservative fiscal policies for both States and the Centre, minimising external debt to reduce external shocks, fostering a strong domestic investment climate and exercising independence of mind in making economic decisions. 

“We need to reduce the fiscal deficit, particularly at the central level.  We need to improve the quality of public expenditure with focus on those aspects of public expenditure, which promotes growth. To do this, we need to reform some of our poorly targetted subsidies such as those in electricity and fertilisers,” he added.    

Highlighting India’s independent economic thinking, Somanathan pointed out that offering massive fiscal stimulus was the fashion across the world in 2020, while India did not join the league and instead provided a lot of relief in the form of credit and monetary measures. “We have emerged in a reasonably good shape as compared to most other countries.”  

The top bureaucrat also added that the Covid-19 pandemic and the ongoing Russia-Ukraine war has changed the world order. He said the fall out of the war includes the creation of a de-facto economic bloc between China and Russia, energy challenges for Europe due their pull back from Russian energy dependence, besides the impact of Brexit on Britain and the European Union (EU). Such chaos, Somanathan said, is beneficial for countries like India. 

“If we continue to grow at 6-7 per cent a year, we will be way ahead of many countries and will continue to improve substantially in this new system,” he added.  

He concluded the lecture by highlighting what India should do to become a global economic power — have the ease of doing business like city-state Singapore, scientific and technological  innovation like the US, quality focus and work ethics like Japanese, manufacturing prowess of Germans and the quality of life of Scandanavians.  

The event was organised by SASTRA University.