Free Trade To Decide Future of World Economy

In An Interdependent World, All Countries Need To Do Well

- Viral Acharya, Former Deputy Governor, RBI

Healthcare is the most important macroeconomic indicator across the world right now. A large-scale global delivery of Covid vaccine seems a bit too optimistic over the next 12 months. It means that a very sharp, quick global economic rebound is unlikely. In the first quarter of the pandemic, the GDP of the United States contracted 9-10 per cent, or about 33 per cent on an annualised basis. This is true even in Germany, though it is likely to have a swifter rebound because its health curve is under control. China, another bellwether, is in a much better shape. In fact, its economic recovery sounds best because they were able to contain the virus.

Both globally as well as domestically for India, growth is highly interdependent across regions. You can't have a small pocket of the world or a small pocket of India fine on the health curve and expect a huge revival of the economy. You need different parts of the growth engine to be in sync with each other as growth in modern economy is so much dependent on growth based on trade and services. And trade and services can grow in a healthy manner only if different parts of the world are all doing well.