Nobel Laureate Michael Spence speaks to ET NOW on India’s growing economic might

India is poised to boost its economic and geopolitical role in the coming decades, helped by an evolving demographic dividend, rapidly expanding digital economy and GDP growth rates that top the world’s major economies, leading global economists, including Nobel Laureate Michael Spence, said in a panel discussion at Bennett University earlier this week.

“As somebody who has spent the last 25 years thinking about growth in one form or another in virtually every corner of the world, let me just say that the major economy with the highest potential growth rate is India,” Prof. Spence said in a discussion with ET NOW Senior Editor Ajaya Sharma. “India has successfully developed, by far, the best digital economy and financial architecture in the world. It is a transformational architecture.”

The full discussion will be aired on ET NOW on Friday at 7:30 p.m. and Saturday at 8:30 p.m.

India’s leap on the technology front will be a key catalyst for the economic expansion of the nation, currently the world’s fifth biggest economy and its pivotal position in international affairs, he added.

Responding to a question from a student on crypto assets, including bitcoin, Prof. Spence said, “Crypto currency is not a currency…because a currency is a store of value and a medium of exchange. If its value changes by a factor of 20 or 30 per cent in a week, it is hard to believe it is a store of value. It is only a currency for those people who want to hide in the darknet.”

He added, “What we will have, are central bank digital currencies. They are like regular currencies because the central banks control that. They are going to solve extreme data security challenges. Whole economies and financial systems are going digital and so do currencies. The notion that we will have an economy running on a currency that’s entirely decentralized-- is not going to happen.”

Remarks by other panelists outlined in depth how India would play a bigger role on the global stage. “India is at the cutting edge of transformation in technology, which I think is a basis for optimism,” Rob Johnson, President of the Institute for New Economic Thinking (INET), said in the discussion. The country’s rising international role comes amid evolving geopolitics in the backdrop of conflicts in Ukraine and the Middle East, and mounting trade and military tensions between China and the United States.

“I had pointed out at the ETNOW Global Business Summit in the presence of Prime Minister Narendra Modi ji last week-end, how confident we all are about India becoming the world’s third largest economy with a GDP of USD5 trillion in the next three years, and I am delighted that Prof Spence is also so positive about India”, said Times Group MD Vineet Jain. “It has been a great experience interacting with him and hearing his views –first at the ETNOW GBS, and now, at the panel discussion at Bennett University which will be aired by ETNOW”, he added.

“The relatively open global economic system that has been in place for over 70 years, but it is breaking down under the pressure of enormous array of shocks, pandemics, geopolitical tensions involving U.S. and China and others, climate shocks are very frequent and severe,” Prof. Spence said in his other remarks.

The world is undergoing a turbulent phase, which he likened to a “regime change in global economy.”

“This is the world that has characteristics and experiences that we haven’t felt for the last three decades. That’s what I mean by regime change and disruption,” he said.

In such a juncture, India is exporting a vision “at the cutting edge of this new frightened world,” Mr Johnson said. “India in the realm of technology is a visionary and an ambassador to transformation.”

Prof. Rohinton Medhora, chair of governing board of INET, said a significant part of global wealth are in intangibles and intellectual property.

“The source of wealth is locked up in intangibles. Most governments haven’t fully caught on to govern an economy, where so much wealth resides in intangibles, where fixed costs are high and marginal costs of production are practically zero.”

“If it is existential, firms will get it. But often existential is still 10, 20, 30 years down the horizon. Very few firms have that horizon because they don’t have that capital or staying power. So, we need capital markets that encourage that kind of horizon,” said Prof. Medhora.

Mr. Johnson summed up India’s current role citing French author and aviator Antoine de Saint-Exupéry’s famous novel The Little Prince, “Its only with the heart, one can truly see.” India sees that with more clarity than almost any other country, he said.

The discussion was held at Bennett University (BU), which is the higher education initiative from The Times Group and comprises six schools with undergraduate, postgraduate, and doctoral programs across the highly popular Computer Sciences, Engineering, Management, Law, Media, and Liberal Arts streams. Set up in 2016, BU is among the fastest growing universities, focusing on making students employment and industry ready in the shortest possible time.

The discussion with Prof Spence and INET is an ET NOW presentation and will air on Friday (7.30pm) and Saturday (8.30pm). ET NOW is India’s leading English business news channel and leads with its focus on both markets and finance as well as content around development, economy, government and policy issues. ET NOW engages with viewers in 16 countries across the globe.