Prime Minister Narendra Modi's state visit to Washington was very successful, particularly on the economic front, Jared Bernstein, a top economic advisor to President Joe Biden has said and underlined that India is a longtime friend of the US.
During Modi's stay in Washington from June 21 to 23, several historic steps were taken to further strengthen India's bilateral ties with the US.
During the meetings between Prime Minister Modi and President Biden, the two leaders highlighted the long-standing friendship and growing cooperation between the two countries, which spans areas like trade and investment, defence and security, energy, climate change, and people-to-people ties.
Bernstein, a top American economist who is the chair of the United States Council of Economic Advisers at the White House, said the recent Official State Visit of Prime Minister Modi to the US was a very successful visit, particularly on the economic front.
“We recognise India as a longtime friend of our country, but also as a very much a growing democracy. We have strengthened those ties with meetings of this type... From an economic perspective, we remain very much open to global trade, and that means we're open to trading with some of the larger and the smaller economies out there,” he told PTI in an interview.
“But of course, India is right in the middle of that discussion. At the same time, I think it should be clear that we're also investing domestically, investing in domestic production, welcoming foreign direct investment from other countries, but also standing up the kinds of industry that I talked about in an early comment to you,” he said.
Bidenomics is the way to grow the economy from the bottom up and the middle out, not from the top down, which has failed the country for many decades, he said.
President Biden's plan - the White House has adopted the nickname “Bidenomics” - aims to “move beyond” the “trickle down” economic theory that it says disproportionately benefits the wealthy and big corporations through tax cuts while reducing investment in priorities such as infrastructure and education and failing to protect market competition.
On the shortage of qualified manpower in the US and increasing H-1B intake from countries like India, the presidential advisor said that one of the important pillars of Bidenomics is running a very tight labour market.
“So we've had a labour market where the unemployment rate has been below 4 per cent for over a year and a half. What that's doing is it's pulling more people into the labour market. We now have labour supply indicators that are at all-time highs. If data goes back in some cases all the way to the 1940s, all-time high for pulling people into the job market. So that should help to ameliorate some of those supply crunches that you were referring to,” he said.
Bernstein also said that “Bidenomics is an importantly different way of growing the US economy from what we call the middle out and the bottom up. For years economic policy in our country was something called trickle-down, where the idea was to give tax cuts to the richest people, cross your fingers and hope against decades of evidence that would reach the middle class. but it just didn't work and it doesn't work.”
“President Biden has a very different vision. Invest in America, empower workers, and lower costs to greater competition. That's the way of Bidenomics and that's the way to grow the economy from the bottom up and the middle out, not from the top down, which has failed us for decades on end,” the top presidential advisor on economy said.
“Now, some of that is targeted at domestic investment here, and we're certainly not shy about wanting to do that. But one of the things we've seen is foreign domestic investment go up quite significantly since these investment agendas have come online,” he said.
“So, we're seeing companies from Samsung and Panasonic and LG building battery factories across the United States. Also, we believe we're helping to lower the global cost of producing clean energy, and that is a benefit to countries across the globe,” he said.
The US had a 2.4 per cent growth rate in the second quarter that was well above expectations, and that for the US is quite a good pace of growth, he said and attributed this to at least three factors.
“First of all, strong consumer spending. One of the really key attributes of Bidenomics is a tight labour market that empowers workers. Our economy is 68 per cent consumer spending. So, if our consumers are doing well in the labour market, if they're facing real pay raises, which has been the case over the past year, that makes a difference to that key sector,” he said.
“We saw a deeper investment in the second quarter, and that relates to...various legislative measures have incentivised investment in standing up industry here in the United States, EVs, clean energy, computer chips. Third, inflation came down significantly in the second quarter and that mechanically boost growth,” Bernstein said.
Responding to a question on the challenge being posed by China, he said the area where China has been most challenging, of course, is in geopolitical conflict.
“Of course, there's Ukraine and China's relationship there, but as an economist here, I try not to talk about that... From an economic perspective, we still have robust trade flows with the rest of the world, including China. I think that's important,” he said.
“What we've talked about is de-risking, not decoupling that is trying to make sure that we're dealing with supply chain problems, making sure our supply chains are much more resilient, trying to make sure that we're not dealing with countries who want to weaponise technology against us. At the same time we maintain trade flows that are helpful to keep prices down and take advantage of some of the more positive aspects of globalisation,” the top presidential economic advisor said.