Impact of West Asian strife on world will be muted, says economist Kletzer

The escalating West Asian conflict could pose a price shock to the global economy though the impact would be less than in the past as reliance on oil supplies is less, Kenneth Kletzer, professor of economics at the University of California, told ET.

“First risk is oil… It matters less than in the past…but it matters on what kind of war we see, how prolonged it is, and what kind of oil shock we see,” he said, pointing out that output of the US and Russia have gone up over the last century. Iran is under sanctions, so it’s limited in its exports of oil already, he pointed out.

Kletzer, who is in India to attend the third edition of the Kautilya Economics Conclave, said any kind of global uncertainty is going to rile markets.

Global crude oil prices jumped post escalation of conflict between Israel and Iran following the latter’s missile attack.

Stock markets globally, including India, have witnessed sharp downward swing.

Asked about India’s goal to become a developed nation by 2047, Kletzer said he was optimistic about India’s growth but the target is ambitious.”I’d say it (the developed country status) is a huge ask because it’s asking for a higher growth rate than China has attained, and it’s asking to sustain that for several years,” he said. “If you crank out the calculation, you get a growth rate of the order of 9%-10% a year at the minimum. And that’s hard to sustain.” Kletzer said “being a powerhouse of the emerging markets…is a more realistic goal.”

He noted that India’s growth and reduction in poverty is palpable and incredible, but said income inequality is a stumbling block to welfare.

Kletzer is a founding member of the research panel for the India Policy Forum, a joint project of the National Council for Applied Economic Research (NCAER) and the Brookings Institution.

Asked about the US presidential election, he said the world has a lot to worry about.

“I see a big difference between the two candidates for the world,” Kletzer said. “We see it (the elections) in the United States as a big deal. It’s really important and really critical, and a large part of that discussion in the United States is about democratic institutions. There’s also, of course, the concern about what kind of social friction might be there,” he said.

“I think the rest of the world has a lot to worry about global politics, peace, and economic policy,” Kletzer said, adding that one choice (for the president) would put the world economy in a much more uncertain place, raising global uncertainty and the possibility of sort of rash actions that are not well thought out primarily with trade.

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Impact of West Asian strife on world will be muted, says economist Kletzer

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