'In 15 years, India will be what China is today'

Arvind Panagariya has been appointed as the vice-chairman of the newly announced NITI Aayog.

Panagariya is Professor of Economics and Jagdish Bhagwati Professor of Indian Political Economy at the Columbia University in New York.

He is non-resident Senior Fellow at the Brookings Institution. He was formerly chief economist with the Asian Development Bank and  Professor of Economics and Co-director at the Center for International Economics.

He has also worked with the World Bank, IMF, WTO, and UNCTAD in various capacities.

He is currently editor of the India Policy Forum, a journal modelled on the Brookings Papers on Economic Activity and jointly published by the Brookings Institution, and the National Council on Applied Economic Research.

In an earlier interview with Shobha Warrier of Rediff.com, he speaks about climate change, globalisation and India's economy.

Excerpts:

Your SAGE-MSE lecture was on 'Climate change and developing countries'. Is there any difference between developed countries, developing countries and climate change?

The developed countries are vulnerable to climate change a 100 years from now. On the other hand, developing countries are vulnerable to climate. Our problems are here and now, and not 100 years from now.

We are exposed to heat waves, cold waves, floods, cyclones, etc and we are not prepared. A large part of the population is living in such conditions that they are not protected from these climatic conditions.

That is why I said, our vulnerability is to climate right now, and not climate change. The solution lies in how we use our resources and what kind of policies we adopt -- and these are different for developing countries.

But in the case of developed countries, the problem is how to control global warming largely from carbon emissions resulting from burning of fossil fuels.

What we need is development. We need the poor to be pulled out of poverty. If we do it rapidly, the less vulnerable they will be. A lot of the development cannot happen without energy. So, there will be more carbon emission and not less.

The problems that developed countries face are about tomorrow and the future, while it is the present that is what is worrying for developing countries.

Yes, the ideal situation is where we could find alternate sources of energy which are from non-carbon, non-fossil fuels. Then, we can have development without causing any further damage to the environment.

But today, developed countries are dictating to the developing countries on what to do and asking them to stop development while they have already reached a stage. . .

Yes, they may not have said so in so many words but the implication is just that. They say, unless China and India do mitigation, they can't do it.

I make a distinction between China and India as China is far ahead of India and the incomes are five times our incomes already. Their emissions are 4-5 times larger than ours. So, we are not on the same scale.

I feel time should be given to China, India and the African countries. You can't ask these countries for mitigation now. They should leave us alone till 2030-2040 before we start mitigation.

You live in the United States. When you say this, how do they react?

They have no real answers while I have all my points with me. Yes, the sensible ones agree with my arguments.

When you talk of mitigation, the Kyoto Protocol uses 1990 as the base year -- but it never happened. Between 1990 and 2005, the increase in the US emissions is about 80% of our total emissions today. The increase in their emissions is more than our total emission. So, you can't ask a poor country like India to start mitigating now. But they say, they will not mitigate unless China and India do.

Is it not a Catch-22 situation? India and China cannot mitigate till they develop, and the developed countries will not unless these two countries do...

If I were a developing country, I will not accept the mitigation option for quite long. At least till 2035 or so.

What would happen, if under pressure from developed countries, we were to mitigate now,?

We will have to compromise on our rate of growth and poverty alleviation then. Our growth percentage will be down by 1%. In 10 years, we will lose income worth $2 trillion.

What is the solution to the problem?

The solution is for the developed countries to invest heavily on research which the poor countries will not be able to do.

Even if India and China start mitigation now, unless we have new technology, it will not have the desired effect. We need massive investments in research which only rich countries can do.

By poverty we mean people getting two square meals a day and not in the sense Americans see it. With 300 million or more people living under (our definition of) poverty, how can poor countries provide resources except human resources and skills?

But if you keep fuel prices cheap, who will invest in research? If you have carbon tax, people will reduce using fuel.

Would you say climate change, poverty and world economy are interlinked?

They are all interlinked.

Do you also feel that real mitigation should come from developed countries?

For quite a while, yes. First, they are emitting a hell of a lot more than the developing countries. Even after mitigating, they will be emitting more than the poor countries.

If you look at the Industrial Revolution too, 70-80% of the emissions were by the rich countries. We have barely started. So, morally speaking, the obligation is on the rich countries.

Two years ago, you wrote a book, India an Emerging Giant. Is India really emerging as a giant?

I think it is. With liberalisation, Indian entrepreneurs have emerged and they are top class. With all kinds of regulation in place, we were having 3% growth. Once we are free of all that, growth has accelerated.

After liberalisation, the rich has become richer and the poor, poorer...

I will agree with the first half of what you said; that is, rich getting richer. I don't think the poor are getting poorer. The number of poor in the country has declined.

In the late 1970s, we had 50% of the people below the poverty line. If it were 50% today, it would have been 600 million people but we have only 300 million people below poverty line.

It is totally wrong to say that we have done nothing to the poor. It is possible that some poor people got poorer. On the average, poor also have benefited from liberalisation.

Do you think in a decade or so, economic power will shift from the West to Asia with China and India emerging as major economic powers?

It is inevitable. Japan is also in Asia. Today, the top three economies are this side and the US is the only one on the other side.

In 15 years, even with my conservative calculation, we will more or less become what China is today and that will make us the fourth largest or maybe even third economy in the world.

That is, China, Japan, India -- three of them in Asia. But the US will still have the dominance though the dominance will decline.

See how quickly they have managed to come out of the gigantic economic crisis. They could have gone into depression but they didn't.