Indian economy ready for recovery, but high crude oil prices worrying: Chief Economic Advisor
‘Banking sector stable, capital available and ready to take loans’
Chief Economic Adviser (CEA) V. Ananth Nageswaran said on Thursday that the Indian economy is poised for recovery but high crude oil prices are a matter of concern.
In a webinar organized by the Bharat Chamber of Commerce, he said that the banking sector in the country is stable, capital is available and in a position to take loans.
“We are not unique to the phenomenon of precarious growth and high inflation due to the pandemic. Developed countries are also facing the same problem,” he said.
He said that the budget for 2022-23 was made keeping in mind that the price of crude oil will be around $ 75 per barrel. But due to the tension between Russia and Ukraine, the price of Texas crude has now gone up to $ 96 per barrel. “Its impact on the Indian economy will depend on how long this high price will last,” Mr. Nageswaran said.
According to him inflation and purchasing power are a worldwide problem. This has been caused by increased shipping costs, higher container costs and higher oil prices.
The inflation rate in India is currently hovering around 5.2 percent. “But, I think it should remain within 4-6% in the next fiscal, which RBI is targeting,” he said.
The CEA said that the market decline has started in India. “The level of activity in some industries has exceeded pre-pandemic levels. But the service sector is yet to recover”.
Regarding private sector investment, he said that it still picks up because of the pandemic cloud which is still there. He said it would accelerate as consumption levels rise.
“But the capital expenditure plan in the budget is higher in 2022-23. This has been done to fill the void. In fact, there has also been an increase in capital expenditure by the states,” Mr. Nageswaran said.
On the low allocation for MGNREGA in the budget, he said it was a demand-driven programme. “This has been done hoping that the economy will recover and the demand for MGNREGA funds will subside. But if there is a demand for the programme, funds will be made available for it.”
According to CEA, there are buffers in the budget. “I expect recovery to start from the second half of the next fiscal. Nominal GDP growth is targeted at 11%. With inflation at 4%, real GDP growth will be 7%.” He said that for India to become a $5 trillion economy, the share of agriculture, manufacturing and services in the country’s GDP should be in the ratio of 20:30:50.