Open economy is in best interest of every nation: Singaporean minister

Mumbai: Senior Singaporean Minister Tharman Shanmugaratnam on Tuesday said keeping the economy open to the world is in the best interest of every nation and that import substitution or protectionism is no way to ensure the prosperity of those in the bottom of the growth ladder.

Citing domestic concerns, India walked out of the world’s largest regional trade formation Regional Comprehensive Economic Partnership (RCEP) last November.

“India will realise soon that joining the RCEP is in its own best interest and not anybody else’s,” Shanmugaratnam said while answering a question on the same after delivering the third Suresh Tendulkar memorial lecture at the RBI headquarters here on Tuesday.

Stating that the ongoing US-China trade war will have serious lasting implications for the whole world in terms of economic growth as well as geopolitical dominance, Shanmugaratnam said the worst impact, however, will be on the technological innovations front wherein there is no clear leader apart from these two nations now.

Delivering the Tendulkar memorial lecture, Shanmugaratnam, who is also chairman of the Monetary Authority of Singapore, said if India is to achieve its ambitious target of nearly doubling its economy to USD 5 trillion by 2025, it will have to undertake serious structural reforms to create jobs.

He added that it will not be possible without radical structural reforms in education, labour laws and overall governance by increasing the delivery of the state capacity.

“India has to deliver massively on all these critical areas within the next five years if it were to double the economy. You have only a five-year window otherwise to do all these, or else it will be too late,” he said underlining the need for jobs creation as the most important area to achieve the overall prosperity for all.

With over 250 million people in the 15-25 age bracket, India is home to the largest young population in the world. But, this advantage will become a burden if enough jobs are not created, he said.

“For the next decade, India needs to create at least 140 million jobs. But, this cannot be achieved if education is not reformed to focus on skill enhancement, if India doesn’t arrest the number of stunted companies which is the largest in India currently due to poor/stringent labour laws,” he said.

On education, he said that although many strides have been made over the years, there is not much impact at the ground level, especially on the skilling side. So, the critical area that needs urgent improvement is the enhancement of skills so that people are employable, he said.

He also urged the Reserve Bank of India to include in its focus financial and growth stability along with price stability to ensure that financial inclusion is broadened to include the poorest of the poor.

“Economic transformation cannot happen without financial inclusion of all, especially of the poorest of the poor, for which the critical primary condition is jobs and productivity growth,” he said adding that “over the next five years, India’s productivity growth has to improve from the present 5 per cent to 7-8 per cent which can help it grow to USD 5 trillion by 2025.”

Another area of improvement is a proper reallocation of the farm labour to more productive industrial sectors as well as within industries, he said adding that there are many legacy issues on this front.

So, the next five years are critical for India so that the youth are transformed for the future. But, to achieve all these, the role of the government should be redefined by enhancing the state capacity at delivery and regulation, he said.