DAVOS: Indian Prime Minister Narendra Modi warned Tuesday against a new wave of protectionism, saying that trade barriers pose a danger to the world on a par with climate change and extremist attacks.
Modi delivered the message in a speech just hours after the U.S. government of President Donald Trump approved tariffs on imported solar-energy components and large washing machines in a bid to help U.S. manufacturers.
"Forces of protectionism are raising their heads against globalization," he told a crowd of business and government leaders in the opening address at the World Economic Forum in Davos, Switzerland. "It feels like the opposite of globalization is happening."
Without directly referring to Trump or the U.S., Modi said the "negative impact of this kind of mindset cannot be considered less dangerous than climate change or terrorism."
He urged governments not to turn to isolation, driving home his point by quoting Indian independence leader Mohandas Gandhi: "I don't want the windows of my house to be closed from all directions. I want the winds of cultures of all countries to enter my house with aplomb and go out also."
Modi's speech to the global elite, the first time an Indian prime minister has made the opening address at the WEF, comes a year after Chinese President Xi Jinping laid out his country's credentials as a champion of free trade and stability on the same week Trump was inaugurated president.
The forces of globalization, which have driven the world economy for the past couple of decades and that both China and India have benefited hugely from, are perceived to be facing a challenge from Trump who was elected on an "America First" mandate. Trump, who is due to make his own speech on Friday, argues that a strong U.S. economy is a boon to the wider world and that the tariffs are about rejigging a biased trading system.
Though the possibility of a tit-for-tat trade war between major economies is one of the clouds hanging over the global economy, optimism over the outlook is better than at any time since before the global financial crisis erupted a decade ago. The International Monetary Fund, for example, upgraded its global growth forecast for 2018 to a seven-year high of 3.9 percent with India growing at a more-than-healthy 7.4 percent.
Modi is credited by many for helping to revitalize the Indian economy, which last year grew by 6.7 percent, according to the IMF. A longtime Hindu nationalist, Modi was swept to power in 2014 by playing up his economic credentials, pointing to the industrial revival of his home state during his tenure there and promising to transform the country's economy.
"The interesting thing is that if you have a prime minister who understands the fundamentals of economics, he does the right reforms and Modi is doing that," said Frank Appel, CEO of Deutsche Post DHL.
Appel is particularly impressed by the reforms to the sales tax system, with a nationwide tax replacing a confusing tangle of state taxes. The changes, he said, will "pay back to India in a big way."
While Modi has done such things as open more of India's economy to foreign investment, his critics say he has not been averse to protectionism either, with a "Make in India" program that backs domestic producers, sometimes through tariffs.
"I think they've got a lot more reforms they've got to do, a lot more, but what I can say for Modi and his government is: 'So far so good,'" said Nariman Behravesh, IHS Markit's chief economist.
Modi highlighted India's strong economic growth during his speech, noting that when an Indian prime minister was last in Davos in 1997, the country's GDP was just a little more than $400 billion. Now when it is "about six times that amount."