New Delhi, Oct 3: India’s drive for economic resilience should not translate into insulating itself from international markets, Principal Secretary to the Prime Minister PK Mishra said, underlining that economies can build resilience by staying globally connected while reducing vulnerability to external shocks.
Addressing the 5th Kautilya Economic Conclave, Mishra noted that domestic production can be costlier than importing from the cheapest global markets. He also said that building domestic capacity can be beneficial at times of global disruptions.
“Domestic production may cost more than importing from the cheapest global stores. The benefit is realized only when the disruption occurs,” he said, adding, “resilience cannot be insulation from the world. It has to mean the ability to remain open to the world without becoming excessively vulnerable to it.”
Mishra noted that rising uncertainty is influencing the economic behavior of businesses in the form of postponing investments, diversifying suppliers, maintaining larger inventories and building spare capacity.
Governments are adopting similar measures by building reserves, strengthening fiscal buffers and investing in capabilities that may appear costly in normal times but can be valuable at times of economic disruptions.
“This means they pay additionally for resilience. This is what we are increasingly seeing across the world today, as economists tell us resilience is not free,” Mishra said.
Het also highlighted the importance of appropriately pricing risks while balancing the additional costs that economies can afford to bear for greater resilience.
He explained that risk can be broadly assessed through two approaches. The traditional approach considers the range and probability of possible outcomes, including both gains and losses, while the second focuses on the probability of returns falling below a critical or “disaster” level.
“The second approach is being adopted by many countries today.” ANI reported Mishra as saying. He also cautioned against treating domestic manufacturing as a replacement of imports, stressing that resilience and productivity must be paired with productivity and competitiveness.
“The purpose of building domestic capability cannot simply be to replace imports at any cost. The ultimate objective has to be to create capabilities that are competitive, scalable, and eventually export-oriented,” ANI reported Mishra as saying. (With ANI inputs)
