Indian economy better placed than other nations: CEA

NEW DELHI: Chief economic advisor V. Anantha Nageswaran on Tuesday rejected any risk of stagflation or recession for India.

Speaking to the media, the CEA said the Indian economy is better placed than other countries including the developed world as it is more resilient, and that the financial sector is in a “far better health than before”. The country had also ensured adequate availability of food grains and fertilisers.

He was of the view that in the case of developing countries including India, there is more scope for growth, although they go through a phase of slowdown, while in developed countries the growth prospects get saturated.

Stagflation occurs when economic growth slows, even as unemployment and inflation remain high. Fears of stagflation have arisen as inflation is already at multi-year high levels, while GDP growth for the fourth quarter of FY23 came in at 4.1%, against 5.4% growth in the previous quarter.

The CEA said that sequential growth was low because of the impact of the Omicron variant of Covid in January. He, however added that a year-on-year growth of 4.1% and the robust goods and services tax collections indicate that the “momentum” is intact. The goods and services tax (GST) collections hit an all-time high of ₹1.68 lakh crore in April.

Noting that India’s inflation is currently high, he said advanced economies have seen a steeper surge in inflation compared to India. “Provisional estimates of CPI inflation for Germany and Spain are 7.9% and 8.7%, respectively, in May ’22,” he said.

India’s retail inflation for April rose to an eight-year high of 7.79%, according to government data.

Nageswaran also rejected any concerns of a recession in the current fiscal year.

A presentation by the CEA said: “The Indian economy consolidated its recovery in FY22, with most constituents surpassing pre-pandemic levels of activity; continued expansion of economic activity is evident in high frequency indicators during first two months of Q1 FY2023.”

He said balancing growth, inflation, fiscal, and current account deficits and the external value of the rupee will continue to be the policy focus in FY23. “The silver linings are that India is better placed than many other nations and the financial sector is in a far better shape to support growth in this decade,” he said.

Nageswaran said challenges to both domestic and global economies continue as the Russia-ukraine conflict drags on, commodity prices remain high and developed countries tighten their monetary policies.

Regarding the recent steps to calm inflationary concerns, including an excise duty cut on petrol and diesel, he said they will impact the arithmetic as outlined in the budget in February, but that an estimation of impact on the fiscal deficit cannot be calculated immediately.