Amid the current anti-Chinese sentiment triggered by the Sino-India border tension and talks of an import substitution policy, Chief Economic Advisor Krishnamurthy V Subramanian on Tuesday said shutting the doors to other countries will not help India.
He said the country had followed the import-substitution model till 1991, and that approach has been discredited since. Speaking at a webinar organised by MCCI, Subramanian said, "India has to compete with other countries and insulating itself from others will not help."
"Having said that, there are, however, exceptions to this. I will not say that trade should continue with countries which are creating problems at the border," he clarified. His comments came after the nationwide clamour for a boycott of Chinese goods is getting louder, following the fierce clash between the troops of India and China in eastern Ladakh that left 20 Indian Army personnel dead.
Subramanian said it is still not certain when demand in the economy will pick up. "The prevailing uncertainty is purely due to health reasons and it will go probably when the vaccine is available to fight COVID-19," the chief economic advisor said.
Quoting Nobel laureate economist Joseph Stiglitz, he said that no measure will help create demand-push in the economy in these times of uncertainty. According to him, people will defer discretionary spending and only expend money on essential items. The same psyche applies to firms as well, he added.
Regarding micro, small and medium enterprises, Subramanian said the government has announced a package for the sector to take care of their liquidity problems. The Centre had unveiled a major booster dose entailing a series of initiatives for micro, small and medium enterprises, including Rs 3 lakh crore worth of collateral- free automatic loans for businesses.
A subordinate debt of Rs 20,000 crore for stressed units, a fund of funds for equity infusion of Rs 50,000 crore, and revision in the definition of MSMEs are among the steps announced by the government to help MSMEs recover from disruptions caused by the coronavirus-related lockdown.
He said that the real estate sector is important for the economy as the construction industry creates lots of jobs. Subramanian said that the government is working on a concept like Full-Time Equivalent (FTE) where people will work on contractual terms with all benefits but not for lifetime.