Mumbai: An overly pessimistic view of the Indian economy is not warranted at this point of time since rural demand continues to be strong and banks are well capitalized and healthy, said Suresh Tendulkar, chairman of the Economic Advisory Cuncil to the Prime Minister.
“I think the psychology of gloom and doom has been imported (from the Western world) without justification in the country,” said Tendulkar on Monday at a seminar organized in Mumbai by the Federation of Indian Export Organisations. “I have been accused of being over optimistic to predict growth of 6.5-7% in 2009-10, but it is overly pessimistic to talk about 4%,” he said.
The International Monetary Fund in April had projected that India could grow at 4.5% in 2009, down from its earlier estimate of 5%.
He pointed out that “domestic demand has not been affected seriously as in other advanced countries, banks have not been affected as much … yet, banks are unwilling to lend, consumers are unwilling to spend and investors are unwilling to invest.”
On the contrary, Tendulkar said, the slowdown provides an opportunity to invest in technology and diversify both regionally and globally.
While conceding that the stimulus packages have widened the fiscal deficit, which in turn crowds out private investment as government borrows more from the market, Tendulkar said “it is justified by the premise that minimizing slowdown is more important than crowding out private investments.”