Will see robust growth thanks to reforms, capex push, says CEA

Chief Economic Advisor (CEA) K V Subramanian on Tuesday said India’s economy is all set for robust growth on the back of government’s capex push, structural reforms, rapid inoculation, and financial sector clean-up and will recover to precovid levels by next year.

On the ripple effect of a tapering by the US Federal Reserve, he said that it should not be much of a concern for India. “Whenever tapering happens, India will be in a very good position to withstand it. India’s macroeconomic fundamentals are much stronger now than post the global financial crisis,” the CEA said.

While speaking on the latest GDP figures, Subramanian said the increase in GDP growth despite the intense second wave during the June quarter (Q1) was indicative of continued economic recovery. He said it was mainly supported by rapid surge in inoculation, which had covered 24 per cent of the total population during the period.

He further said GDP growth in the current financial year (FY22) should be around the Budgeted target of 10.5-11 per cent. However, economy will rebound to pre-covid levels by next year.

“GDP data for the Q1FY22 reaffirms the government prediction of an imminent V-shaped recovery that we had made last year this time… recovery supported by rapid surge in vaccination coverage from 4.7 per cent of the total population in Q4FY21 to 24.5 per cent in Q1FY22,” Subramanian said.

India’s GDP grew 20.1 per cent in Q1, attributed to a low base in the year-ago period. “India is poised for stronger growth [thanks to] structural reforms enabling efficiency and productivity, government’s capex push to enable private investment, and financial sector clean-up and reforms,” he said. The external sector is providing a cushion, and forex reserves continue to grow. Despite supply-side restrictions due to the pandemic, inflation was much lower than during global financial crisis because of supply-side measures, Subramanian added. On sectors, he said, there is steady recovery in petroleum consumption and auto sales, which reached pre-pandemic levels.

“WHENEVER TAPERING HAPPENS, INDIA WILL BE IN A VERY GOOD POSITION TO WITHSTAND IT. INDIA’S MACRO-ECONOMIC FUNDAMENTALS ARE MUCH STRONGER NOW THAN POST-GLOBAL FINANCIAL CRISIS”

K V SUBRAMANIAN,

CHIEF ECONOMIC ADVISOR