“We will have to continue on all fronts. One cannot rely on one single factor or even two such sources. So first, there is the opportunity for a reform of the direct taxation, particularly personal income taxation. This is a good opportunity to simplify to end all the exemptions. We also need to do something about disinvestment,” says Arvind Panagariya, Former VC, NITI Aayog
What is your reaction to the GDP numbers that have come in?
There are no surprises. If anything, I see good news because the recovery seems to be quite wide, meaning it covers almost every sector of the economy. There had been reservations about private consumption but that also has come to pre-pandemic level, as also the fixed investment and of course government expenditure.
Every sector is showing recovery and that is a very welcome part. It says that the general strength of the economy is not being driven by one or two sectors alone, it is fairly broad-based.
First of all, because the economy contracted in 2021 by 6.6%, we do see the growth rate to be elevated 8.7%. There is clearly a very strong base effect and that is the dampener or the pessimistic side of the 8.7% figure. But the optimistic side of that figure is that the effect of the pandemic has continued in the 2021-2022 as well and the GDP levels, sectoral output levels have returned pretty much to pre-pandemic level. The good news is that the recovery has been robust as was the hit from the ..
Would it be fair to say that India has now managed to come back to pre-pandemic levels of growth and this gives us a strong base to move forward, all things considered?
Fingers crossed yes. For two years, this virus has devastated the entire globe and one hopes that finally we are seeing the end of it. The world unexpectedly also got hit by another external shock which is the war between Ukraine and Russia. So unexpected things have happened but they are more or less known. I am willing to bet on next year being quite good.
Would it be fair to say that manufacturing continues to be a cause of concern? For India that is a big question mark because a lot of employment in the country is generated from manufacturing and the numbers have not shown the pick up one would have hoped for?
For me, manufacturing has always been an issue in India because that is where good jobs for the masses can be created. The services jobs that get created are not so well paid and it is manufacturing which can do that. That has been the experience of all the countries that have successfully transformed – from South Korea to Singapore to Taiwan and to China.
In India we have not seen that. Now even Bangladesh and Vietnam are creating decent jobs for the masses from manufacturing but we have not done that. That is a long term issue. Within our own context, the 9.9% growth in 2021-2022 that we have seen after a decline of 0.6% in the previous year is a healthy thing to have happened.
In the context of the last two years, I am not so unhappy but we certainly need to do something on the manufacturing front, particularly in terms of the labour intensive manufacturing which seems to get neglected by businessman, by policymakers and by everybody. The headlines always get backed by the IT industry, the high tech industry but that is not where the good jobs are for the masses.
The European Union has finally made its decision on not buying Russian crude. Crude prices are already at $124. What does that portend for India?
We will have to live with some of those external factors. The inflation in April did rise as a result to 7.8%. Personally, given the global scenario, I think we have still done reasonably well because our inflation target was 6% and it went to 7.8% which is certainly high and the RBI will have to be taking action in the days to come. But at the same time, to put matters in perspective, the inflation target in the United States is 2% and the inflation rate in the latest month was 8.3%, if I remem ..
The inflation rate in India will certainly not rise beyond what the current April month’s figure was. Very likely in May we will see some marginal decline because there is also a base effect at work and in the rest of the world, elevated inflation is going to stay for a while. We have weathered it well, but on the growth view point, certainly the high oil prices and generally other commodity prices which have been high are a concern.
But these are facts with which we have to live but I remain optimistic because we are also sellers of products, we are not just the buyers of products and we have seen that in our export growth. A lot of the export growth has been driven by higher prices and we should take advantage of that.
How do you see the recent decisions on curbing exports of wheat and caps on exports of sugar? This has been a slightly controversial decision. On the one hand, the government needed to do that to ease the pain of the common Indian and on the other hand, people argued that opportunity to make money was taken from farmers?
Source Name:-Economic Times