New Delhi, Feb 21 (KNN) India needs to uphold its external export-oriented approach and stay receptive to global markets to accelerate growth and ascend to a higher growth trajectory, according to Arvind Panagariya, Chairman of the 16th Finance Commission.

This comes at a time when the country has intensified its attention on import substitution through programs such as Aatmanirbhar Bharat and Production Linked Incentives (PLI) in recent years, to stimulate economic growth and foster employment.

Stepping out of this current phase of import substitution presents a challenge for a nation like India, stated Panagariya, in an exclusive discussion with Rahul Ahluwalia, Director, Foundation for Economic Development (FED), a think tank.

Panagariya underscored the enduring support for industrial policy and import substitution within India's intellectual circles, lamenting the scarcity of advocates for an outward export-oriented strategy.

“I fear that, in our case, exiting this new phase of import substitution will be a challenge,” he added.

Reflecting on his examination of successful high-growth countries like Hong Kong, Singapore, Taiwan, South Korea, China, and India, Panagariya emphasised the correlation between openness to global markets and rapid economic growth.

He cautioned against the allure of import-substituting industrial policy, drawing parallels with South Korea's experience where growth faltered following attempts to curtail imports through industrial targeting, ultimately leading to a swift abandonment of such policies by 1979.

Panagariya stressed the imperative for countries with low per-capita incomes, such as India, to prioritise exports. Highlighting the vast scope of the global export market, valued at USD 32 trillion in 2022—nearly ten times India's GDP—Panagariya outlined the transformative potential of capturing a share of this market.

Drawing parallels with China's growth trajectory, he emphasised how focusing on dominating specific product markets propelled China's remarkable growth over several decades.

(KNN Bureau)