New Delhi: RBI Governor Urjit Patel told Network 18 in an exclusive interview that he hopes countries do not become protectionist and curtail trade in reaction to US President Donald Trump's domestic agenda.
"But I think it is important that we should be on the side of keeping borders open with respect to trade and movement of factors of product," he added.
The RBI Governor said that India should not change its stance of a sustained opening up of the economy since the early 90s.
Patel said that the Indian economy benefits from an open trade regime and that the policy of open trade through a multilateral process is the right one.
Donald Trump, while campaigning to become the President of the United States of America, promised to build a wall along the USA-Mexico border to limit the flow of migrants and renegotiate or “terminate" the North America Free Trade Agreement (NAFTA), the trade deal that eliminated most tariffs between Canada, USA and Mexico and which Trump blames for job losses.
One of the first acts of the Trump presidency was to sign an executive order that pulled the country out of the Trans Pacific Partnership (TPP), one of the largest putative free trade agreements in the world that was being spearheaded by the USA.
The protectionist rhetoric of President Trump has fueled anxiety among other countries about a retreat from the free trade ideals that have been championed by Washington over the past three decades. The fear is that retreating behind tariff walls will crimp already weak global growth.
The European Union, one of the engines of the world economy, is facing uncertainty about its future following the decision by voters in the United Kingdom last year to exit the Union and its common market, which erased internal borders for the purpose of unhindered movement of goods, services and people.
China, another economic dynamo, is facing slowing growth and forecasts for the world economy remain anemic. It is in this context that Urjit Patel’s comments have to be understood.
In 1991, India decided to open up its economy. It has reaped the benefits of dismantling the license permit raj and opening itself up to FDI with economic growth accelerating to one of the highest among major economies in the world. A reversal of the global free trade regime would put on hold India’s plans to grow the economy and lift millions out of poverty.
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