Protectionist stance will shrink global growth, warns Jaitley

The Dollar Business Bureau

Finance Minister Arun Jaitely on Thursday cautioned the world about adopting US President Donald Trump-influenced trade protectionist stance and said such a move will translate into inefficient economies and contracted GDP growth across the world.

Speaking at the ASSOCHAM annual meeting in New Delhi, Jaitley said the world has witnessed a sluggish growth for the last few years and such a move will only complicate the global economies scenarios even further. 

“Developed countries have turned protectionist...If it has impact on trade, movement of goods and people, (it) could make economies more inefficient and reduce GDP,” he said.

Jaitley had presented rather a calculated Union Budget, which came in the backdrop of rising global crude prices, raising risks of inflation, in turn affecting the import-dependent economies.

“Having said this, India is in second phase of reforms, did manage to achieve many areas which were low-hanging fruits, expanding areas where FDI could be attracted - it was not a complicated reform. India is prepared for reforms, much more than it ever was in the past. Bulk of the public opinion favours reforms,” he said.

Trump in his early days of presidency has adopted a protectionist stance, withdrawing from the 12-member Trans-Pacific Partnership and calling for an early negotiation of the NAFTA treaty, which has attracted its fair shares of criticism from the global economists and trade analysts.

Referring to the Prime Minister Narendra Modi-led demonetisation drive, the finance minister said that the demonetisation of old Rs.500 and Rs.1,000 rupee notes has brought "extraordinary large" amount of cash into the Indian banking system.

“It will not just increase ability of banks to lend at more reasonable rates, but also squeeze informal economy and make India a more tax-compliant society. Having been forced into the banking system, it compels even the non-compliant to spend excessively through either the banking system or digital mode. This is eventually going to lead to the squeezing of the informal economy and integration into formal economy,” Jaitley said.