The significance of the first Kautilya Economic Conclave
The Kautilya Economic Conclave (KEC), organised by the Institute of Economic Growth (IEG) in early July, and conceived and sponsored by the ministry of finance of the Government of India was timely. The world was just opening up after two years of being locked down by an unseen pathogen of unknown origin. People were looking forward to travelling and connecting with others. Intellectuals need that as much as others, if not more. Without a vibrant exchange of views, there is no intellectual growth.
KEC was conceived to provide a world-class forum to discuss a range of economic issues confronting India. It was inaugurated by the country’s finance minister, and the Arun Jaitley Memorial Lecture — which was both a stand-alone event and an important feature of the three days of conclave deliberations — was given by Tharman Shanmugaratnam, a senior minister from Singapore. In it, he outlined India’s development successes that have prepared the nation to tackle the challenges that lie ahead. Prime Minister Narendra Modi’s presidential address revealed an acute understanding of the responsibilities of the government towards short-term imperatives as well as medium-term priorities even as it displayed confidence and optimism about India’s ability to deliver on them.
Top academics and policy experts from 20-plus countries (including South Africa, Bangladesh, Nepal, Sri Lanka, Japan, the United States, South Korea, Israel, Malaysia, Singapore, Brazil, Germany, and the United Kingdom) deliberated on areas as diverse as macroeconomic management, jobs and growth, health, climate, infrastructure finance, the welfare state, education, financial sector reforms, geopolitics, agriculture, the future of multilateralism, industrial policy, and geopolitics. An important objective of KEC was to review the status of the global economy, with special reference to India, and frame strategies for short-, medium-, and long-term recovery
The conference was organised at a time when geopolitical and geo-economic uncertainties were — and continue to be — high. The conflict in Europe has raised important questions about the era of globalisation and integration of the world economy that characterised the last three decades since the collapse of the Berlin Wall and the disintegration of the erstwhile Soviet Union.
In its wake, the conflict had accelerated the rise in the prices of many essential commodities that were already going up after many advanced nations unleashed unprecedented fiscal and monetary accommodation in 2020 in response to the onset of the Covid-19 pandemic. It has also brought centre-stage the short- and medium-term trade-offs between energy security and energy transition. For little over a decade, nations have sought to understand and address global warming and the climate crisis. Mitigation efforts (soften and cushion the adverse economic and social consequences of climate change), resilience-building (that includes proactive measures including, most notably, urban infrastructure planning and water management), and active reversal of carbon dioxide emissions broadly constitute the global response to global warming.
In these efforts, developing nations are central in two ways. One is that they must contemplate a carbon-less future that fuelled economic growth and prosperity in much of the developed world. Second, they are unsure of the quantum and the timing of resources that would be made available to them and the terms at which they would be available. They have to grapple with these challenges even as the pandemic and then the conflict in Europe have severely curtailed economic activity in their countries, raised prices all around, and questions over the supply of food and other essential commodities while dealing with both has meant taking on more debt and a much higher debt servicing burden. Defaults loom large.
One of the themes that resonated strongly in KEC was restoring the credibility of multilateral institutions. For decades, one of the reasons why the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) were successful was because trade and political concerns were kept separate. In the session on Prospects for Export-Led Development, it was pointed out that trade policy today was being used as an instrument of power rather than prosperity.
In the session on Growth and Jobs, many of the panellists agreed that countries need innovations that are appropriate for factor endowments. Countries that had escaped the middle-income trap were countries that all had strong manufacturing growth. As professor Arvind Panagariya of Columbia University pointed out, once countries start committing to free trade, they also start prioritising domestic reforms because of the pressure to compete. Free trade, therefore, forces the country to look at sectors with high costs. International trade has rebounded post-Covid, and there was no scaling problem for the world as a whole for countries in their pursuit of export-led growth.
It was in this global milieu that the conclave took place. It recognised that the world is seeking new paths to development. As Lord Nicholas Stern, professor at the London School of Economics pointed out, a real Schumpeterian period of investment and discovery lies ahead.
Chetan Ghate is director, Institute of Economic Growth and V Anantha Nageswaran is the chief economic adviser, Government of India
The views expressed are personal