PremiumHe said that it could lead to to global commodity prices edging up, then it could create problems for India as the current account deficit is already high.
Former RBI chief Raghuram Rajan said that it could be beneficial to India for more openness to service exports to boost growth and in order to do that the country could use its G20 presidency.
In an interview with CNBC-TV18 at the World Economic Forum in Davos, Rajan, however, cautioned that investments in the chip making industry could globally lead to glut and also spoke about the risks for India’s economy as China opens up.
"One of the places we are doing quite well at this point is in our service exports. And if the world was more open to globalisation and if we could use the G20 presidency to push for greater openness towards service exports and there are many impediments to service exports many more so than manufacturing exports. That could be something very beneficial for Indian growth," said ex- RBI governor Raghuram Rajan.
As investments in the chip sector increase, he said that world doesn’t need so many chips as everyone wants to secure themselves by focusing on domestic manufacturing.
"A tremendous amount of investment has gone into chip making. The world doesn’t need so many chips, you go from nothing to a real huge glut. But every country thinks it’s important for its security. That’s an example where the lack of trust between countries creates over investment in certain areas," he added.
As China reopens, he said that said there is a recalibration of some of the policies. He said that it could lead to to global commodity prices edging up, then it could create problems for India as the current account deficit is already high.
"From India’s perspective we would like commodity prices to be lower. Right now, the guess is as China comes up, commodity prices will go higher. And that will be a problem for India which is already running a fairly significant current account deficit. The price of oil plays an important role. But I think if commodity prices stay lower, then to some extent some of our inflationary issues become less important than they are. Our core inflation is still something to worry about," he said.