Hausmann warned that India’s petroleum exports may not be sustainable. India’s refined petroleum exports have been on the rise and has helped India register net export growth in FY23 even as non-oil exports remained stagnant.
India is witnessing remarkable success in the service sector that primarily employs high-skilled workers but the world’s most populous country that continuous to have a “surprisingly small” presence in global goods market compared to the size of the economy needs jobs for everyone, said Ricardo Hausmann, founder and Director of Harvard’s Growth Lab in an interview with The Indian Express.
He, however, believes that India is in the right by making major investments in infrastructure which has accelerated growth rates in some parts of the country such as Uttar Pradesh, where connectivity has improved enormously.
Hausmann, Professor of Economic Development at Harvard University who famously developed the ‘Economic Complexity Index’ that projects a country’s growth potential based on the progress made by it in expanding and diversifying its export basket over the years, predicted that India has the highest potential for growth in the coming year compared to any other country in the world. But Hausmann said India “hasn’t been exploiting” that potential.
“India is the country that has the easiest, or the highest diversification potential. But it hasn’t been exploiting that potential. So we think if it exploited that potential, then that will generate another emphasis for growth. But we think that goods have been hurt relative to services because goods are relatively intensive in inputs that India has been very bad at providing and those inputs are things like mainly the infrastructure side, transportation, infrastructure, logistics, energy, water, etc,” Hausmann said during the interview on the sidelines of CII’s Global Economic Policy Forum 2023.
The economic complexity index (ECI) shows a stagnation over the last two decades as India could barely move from 43 in 2000 to 42 in 2021. During the comparable duration, China managed to move from 39 to 18, Vietnam from 93 to 61 and UAE from 81 to 56. ECI measures the current state of a country’s productive knowledge. Countries improve their ECI ranking by increasing the number and complexity of the products they successfully export.
“I think that India’s success in services is remarkable. It may be that the index doesn’t fully capture that. But it’s also the case that India’s presence in many industries in the global market is surprisingly small. India is smaller than Bangladesh in textiles, it is smaller than Thailand in machinery. It is smaller than Vietnam in terms of electronics. That’s in part because the success that happened in services has not yet happened in manufacturing,” he said.
Hausmann warned that India’s petroleum exports may not be sustainable. India’s refined petroleum exports have been on the rise and has helped India register net export growth in FY23 even as non-oil exports remained stagnant.
“The industry probably has benefited from buying oil from sanction countries, like Russia and Venezuela. I think that that is going to go away, eventually. And you have to think of the sustainability of that industry in a world where India no longer benefits from all of other countries’ willingness to incur costs in order to constrain some bad actors,” he said.
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