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The conflict between the United States and China will harm world trade, which is vital for the reopening of India: Raghuram Rajan


NEW YORK: As the US presidential election approaches, the conflict between the United States and China will intensify, hurting world trade that is “extremely important” to emerging markets like India and Brazil that are reopening in Amid the COVID-19 pandemic, former RBI Governor Raghuram Rajan has said.
Warning that there will be “deeply damaged businesses” in the economy, Rajan said the post-pandemic recovery must be accompanied by a redress process.
“There are going to be huge bankruptcies in the United States certainly and possibly in Europe too as we repair the economy, reallocate resources, restructure capital structures,” he said Thursday at the PanIIT USA virtual conference titled ‘The New Global Economic Standard. : Publish CoVID-19 ‘.
“Certainly, as we get closer to the US elections, the conflict between the US and China is going to escalate and that hurts world trade, which … will be extremely important in the future, especially for markets emerging as India, Brazil, Mexico, which will be significantly affected by the virus and need some source of demand to remove them when they start to open again, “he said.
Former President of the State Bank of India and CEO of Salesforce India, Arundhati Bhattacharya, also addressed the event.
“Global trade will be an important factor if you can jump into it, whether it’s trade in goods and services or trade in digital services, it will be very important and our countries desperately need an open world,” said Rajan.
Rajan, an IIT Delhi graduate and Distinguished Professor of Finance from the Katherine Dusak Miller Service at the Booth School of Business at the University of Chicago, said that containment of the coronavirus in countries like the US and India has not happened to Despite the blockades, while in some countries containment has been a 2 to 2.5 month process and virus cases have been reduced to single digits leading to reopens.
“There are countries, of course, the United States is an excellent example, but also India, as well as Brazil, Mexico, where containment has not happened despite the blockades, despite the enormous costs. As a result, the cost of the virus it’s going to be significantly higher than for countries that have been successful, “he said.
Rajan said that for countries like India and the United States that are still battling the virus, the main problem at the moment is containing the virus, even when he stated that “unfortunately the spread has become significant enough for containment to be very hard”. .
“This creates a huge amount of uncertainty because companies don’t know if there will be new blockades and how difficult it will be. Some states in the United States are talking about new blockades, some states in India are talking about blockades and actually implemented some of those right now, “he said.
Rajan also spoke about some of the trends that may emerge after the pandemic.
“There certainly seems to be more value in working with minds than with hands, especially as we move through the pandemic,” he said.
He noted that in developed countries, 45-50 percent of the population can work at home so that countries can continue to work even in the midst of blockades.
However, in poorer and developing countries and emerging markets, the number of people who can work at home is much less, he said.
“As a result, the blockades have been much more damaging to livelihoods and economic progress, and many in the lower middle class have fallen back into poverty in these countries. There are several years that we have lost in terms of economic progress ” He said, adding that to move forward, there will be more emphasis on education and digital technology.
Rajan also stressed that there will be greater automation of work processes.
“Many companies are discovering how to do things more efficiently during this crisis and that will continue in the future, which also means that we will have to redistribute workers, we will have to discover how to do it more effectively and training is certainly part of the answer, “he said.
Rajan warned that corporations, households and governments will have huge levels of debt as they emerge from the pandemic and there will be a lot of focus on how to restructure and reduce it over time.
“The bad debt problems of banks at the time and the bad debt problems that are likely to arise for banks across the emerging world will be a multiple of what it was in the past and this implies that we must spend much more time creating processes restructuring to get companies back to work and production.
“If we don’t focus on the problem of repairing the capital structures of these companies, we will have much slower growth, much more problems in the future. So this is something that policymakers need to think about,” he said. .
Clients are turning to more frugality and savings, and there will be more pressure for good universal health care as a result of this crisis, Rajan said.
“We have seen the consequences of having an inadequate health system, not only in the United States but also in places like India,” he said.
“There will be much more need for capable governments. We have seen what government incompetence can do and that has been problematic. There will be much more public support for more capable governments but also more support for regulation,” he said, adding that there will probably be more resistance to globalization.

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