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HomeEconomyPaul Krugman's views on Donald Trump's protectionist policies, Indian economy and more

Paul Krugman’s views on Donald Trump’s protectionist policies, Indian economy and more

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Nobel Laureate Paul Krugman is not known to mince his words while speaking on economic topics affecting the globe. The New York Times columnist on Saturday spoke on an array of issues ranging from US President Donald Trump’s policies to the state of Indian economy. The American economist criticised Trump for his protectionist policies which could lead to a disruptive trade war.

We look at Krugman’s views on developments in the global and Indian economy.

On Donald Trump’s trade policies

Paul Krugman accused Donald Trump of not taking his job seriously and warned trade protectionist measures could lead to “risks of a disruptive trade war”. Trump’s views of America were “50 years out of date”, said the US economist.



“He (Trump) does not take the job seriously. He doesn’t say to himself that I am the most important official in the world, I have better do my homework for understanding the issue. He just goes that these are my gut feelings and hires people who make him feel good…that is a frightening prospect,” Krugman said at an event of a media group.

Taking on Trump for his protectionist policies, Trump said, “All the investments the businesses have made is based upon the assumptions that the open trading system would continue. There is an enormous amount of fiscal capital and a large number of jobs are dependent on these value chains.”

The economist said he did not expect Trump’s controversial tariff imposition step to come into effect until two weeks ago as he had “assumed the influence of these business communities would be sufficient… that it would not happen”.

“I am less optimistic now…we have seen reasonably sensible Economic Council Head was fired, completely irrational tariff (was) imposed on steel and aluminium.”



Trump explained how the European countries would act collectively as the European Union on trade and there could be widespread retaliation against US products.

Trade relations between US and Asian countries including China could also take a hit, he said.

Krugman on Chinese economy

“China is a financial crisis waiting to happen. China is an unbalanced economy…the country is sustaining itself with a credit bubble that is waiting to burst…There is a significant risk of a Chinese bubble burst,” Krugman said. He also criticised the “strongman rule” in China.

Krugman on Indian economy

India made rapid economic progress during the last 30 years but Krugman warned lack of jobs and slowing manufacturing sector could derail the growth story of the world’s fastest growing economy.

“India achieved as much economic progress in the (last) 30 years as the Great Britain did in 150 years. It is a very rapid space of transformation….why does there still seem to be visible poverty in India?,” Krugman said.



“Lack of manufacturing could be a major hurdle as India doesn’t have the jobs,” he said.

Another concern for India is high economic inequality, amid rapid economic progress, resulting in uneven distribution of wealth, according to Krugman.

Terming India’s economic growth progress as “extraordinary”, the economist said the country has become (on purchasing power) the world’s largest economy overtaking Japan and while being behind the US and China, it is far bigger than any European country.

Attributing factors that played a role in the economic “progress”, Krugman said there was a dramatic change in India’s policy including liberalised policies taken in early 1990s.

“I am on the Centre-Left, but I do not think the government should have a heavy hand on economy. India used to have Licence Raj, where bureaucratic obstacles were immense and that has not gone away completely but enormously reduced. India has become a much easier place to do business that it was. The PM said India moved from 148 to 100 in the rankings. That is not a badge of distinction, but it is better than it was,” he observed.

He also touched upon the problem of corruption that the country has been facing.

“There are issues of corruption. You cannot become Denmark with Chinese levels of corruption,” he added.



In July, last year, the economist had blamed the Modi government’s note-ban, hawkish monetary policy of RBI and a strong rupee for the tepid growth, saying the 6 per cent GDP expansion was “disappointing” for a country like India.

“Your 6 per cent growth is actually disappointing. You probably should be doing 8 or 9 per cent,” the economist said. Unlike the advanced economies, it is “conventional macroeconomic issues” which are afflicting India, he said.

On November 8, 2016, Prime Minister Narendra Modi took the nation by surprise abolishing Rs 500 and Rs 1,000 banknotes with stated objective to fight the scourge of black money. However, withdrawing 86 per cent of the currency in circulation in a economy that was close to 98 per cent cash-driven, had its impact on growth, as seen in the official data released in May.

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