BackReforms, high public spending give India an edge: Nageswaran
CEA Nageswaran said the resilience, strength of India’s economy came from a series of reforms that it carried out in the recent past, including banking sector reforms and increased public investment that generates demand. He spoke at the Amazon Sambhav Summit, a virtual event on the digital economy and job creation
PremiumNEW DELHI : An improved financial system and a strong corporate sector have made India better-placed among other nations, including advanced countries, amid global uncertainties caused by the ongoing Russia-Ukraine war, chief economic adviser V. Anantha Nageswaran said.
Nageswaran said the resilience and strength of India’s economy came from a series of reforms that it carried out in the recent past, including banking sector reforms and increased public investment that generates demand. He spoke at the Amazon Sambhav Summit, a virtual event on the digital economy and job creation.
“Compared to other nations, even among advanced countries, I think India is relatively better-placed for the simple reason that India paid a certain price last decade... we had a banking system stress which was then compounded by stress in the non-banking financial sector towards 2018," the chief economic adviser said.
India introduced a new bankruptcy code and put in place an ecosystem for bankruptcy resolution in 2016, replacing an old system that had led to excessive delays and asset erosion while tackling industrial sickness. With the resolution of a large portion of bad debt and better provisioning, the banking sector is back in a position to lend more to support growth. The improved financial health of banks and the corporate sector has brought a conducive climate for higher growth-generating investment in the economy. Businesses have deleveraged their balance sheets in the last couple of years, making fresh investments possible.
“So, we are entering into this decade and this conflict (Russia-Ukraine) with a much better financial system and a much more robust corporate financial health. So, that gives us a lot of cushion, and the Reserve Bank of India has ample foreign exchange reserves, and with its recent monetary policy move, it has also signalled its determination to combat the inflationary pressures," Nageswaran said.
He added that with macroeconomic and policy stability, India entered this period of global uncertainty with a fairly comfortable degree of macroeconomic and policy stability.
Nageswaran said the monetary tightening the world over, the lockdown, and the economic slowdown in China are dampening demand for crude oil. “So, all told, I think it is going to be obviously a volatile and turbulent year with a lot of uncertainties. India will not be exempt from that. But I think in the global comity of nations and relatively speaking, India is better placed to handle the fallout," he said.
In the 2022-23 budget, finance minister Nirmala Sitharaman raised the capital expenditure target by 35.4% to ₹7.5 trillion for public investment-led recovery of India’s pandemic-battered economy.
The chief economic advisor said India is expected to grow by 7-8% this year, depending on the duration of the ongoing conflict. As per the Economic Survey, India’s economy is expected to grow 8-8.5% in 2022-23. RBI, in its April policy, trimmed the growth estimated to 7.2% from the earlier 7.8% for the current fiscal year.
Nageswaran said the ongoing Russia-Ukraine conflict has disturbed the global economy and raised commodity prices, especially fuel and food grains.
“While inflation is one aspect of it, food security is another aspect. Thankfully in India, we are relatively far more comfortably placed than others. But there are several countries where the availability of food is more important than even the price," he said.
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