1. Global Economic Dynamics and their Implications for India
Subir Gokarn
Executive Director, IMF
IMC Chamber of Commerce & Industry
Mumbai, February 9, 2017

2. Structure of Presentation
Growth Outlook
Four Key Drivers
Trade
Investment
Technology
Politics
Implications for South Asia

3. Growth Outlook

4. Growth Variations
GDP Growth Rates (%) World USA Euro Area China India

5. Messages IMF's World Economic Outlook did successive downgrades
This trend appears to have bottomed out
But, that's where it seems to be staying!
"The New Mediocre"
"Too Slow for Too Long for Too Few"

6. Opportunities But… Differentiated performance and recovery patterns
Role of domestic and regional factors
How to grow when others aren't?

7. Four Key Drivers

8. Trade: Remarkable Slowdown
Global trade in G&S has grown by 3% since 2012
This is less than half the rate seen the previous 30 years
Between , trade grew twice as fast as GDP
Since then, they are at the same pace
No longer an Engine of Growth?

9. Trade: Contributors to the Slowdown
(WEO Oct 2016)
Deceleration in global demand
Increase in protection in various forms
Peaking out of growth in global supply chains

10. Investment: Also in Slow Mode
Growth rate in Investment slowed from 12% p a during to 3.4% in 2015
Steady deceleration over the past 5 years
70% of EMDEs show investment growth below long-term average, compared with 30% in 2006
Forecasts indicate persistence of sluggishness/decline

11. Investment: Contributors to the Slowdown
Sluggish global demand
Commodity price patterns
Financial constraints: risk aversion
Excess capacity
"Unearthed" capacity

12. Investment: Excess Capacity in Chinese Industries

13. Investment: "Unearthed" Capacity
Two extremely valuable companies have no conventional assets – UBER and AIRB&B
They have "unearthed" capacity
Houses and personal cars were not considered commercial assets, but UBER and AIRB&B have converted them
Several other businesses are similarly unearthing capacity

14. Technology: Rise of the Robots
Robotics moving into increasing number of manufacturing activities
From metal-forming to shoes; even to rotis!
AI displacing humans in variety of activities – call centres!
Rapid obsolescence of skilling and training mechanisms
Where are the jobs going to come from, if at all?

15. Politics: Reversing the Tide
Global integration appears to be in retreat
Perception of iniquitous distribution of benefits
Are protectionist forces going to gain ground in national governments?
Implications for domestic policies

16. Implications for India

17. Threats and Responses Trade decline and protectionist portents
Plug into the Growth Neighbourhood
Diversify to exploit regional opportunities
Investment weakness
Infrastructure and EODB
But, need to understand the "new" investment dynamic
Conventional drivers may be becoming less relevant

18. Threats and Responses
Automation – from Demographic Dividend to Demographic Disaster?
Complementarities between AI, robots and people
Forward-looking assessment of and training requirements
Affordable and sustainable safety nets
Global political trends
Collaborative multilateral counters to dis-integration
Credible sharing of benefits