In­dia may grow 7% rest of the year: Su­bir Gokarn

‘Cur­rent slow­down is seen as im­pact of GST, cur­rency ex­change ini­tia­tive’

The Hindu Business Line - - NEWS - SURABHI

“As com­mod­ity prices im­prove, pres­sures of in­fla­tion and bal­ance of pay­ments for im­port­ing na­tions will re­turn but it is un­likely that prices will surge to the pre-2014 level,” said Su­bir Gokarn, In­dia’s Ex­ec­u­tive Di­rec­tor to the In­ter­na­tional Mone­tary Fund. The for­mer Deputy Gov­er­nor of the Re­serve Bank of In­dia said that the IMF’s re­vised growth pro­jec­tions of 6.7 per cent for In­dia is largely due to the first quar­ter GDP growth es­ti­mates. “It would still sug­gest that the rest of the year will see 7 per cent growth,” he said in an in­ter­view to Busi­nessLine. Ex­cerpts: for all coun­tries. Many emerg­ing economies had suf­fered due to com­mod­ity price de­cline in the last three years. Prices are now start­ing to sta­bilise be­cause of the re­vival in global de­mand and sup­ply man­age­ment be­ing put in place. This is help­ing to sta­bilise the com­mod­ity ex­porters which is a sub-group of the emerg­ing economies.

For com­mod­ity im­porters, the lower prices have been a boon in terms of in­fla­tion­ary pres­sures and bal­ance of pay­ment. As prices im­prove, some of those pres­sures will re­turn but it is un­likely that prices will surge to the pre-2014 level. In the ad­vanced economies, the per­sis­tence of mone­tary stim­u­lus, of some re­turn of fi­nan­cial sta­bil­ity and fis­cal stim­u­lus, where it has been used are im­prov­ing prospects for re­cov­ery.

OThe IMF has low­ered In­dia’s growth fore­cast for 2017...

This is a re­sult of the first quar­ter num­bers. But the 6.7 per cent fore­cast for 2017 would sug­gest that the rest of the year will see 7 per cent growth, which is con­sis­tent with the ear­lier out­look. The slow­down is be­ing seen as tran­si­tory, the re­sult of fac­tors such as the cur­rency ex­change ini­tia­tive and the roll out of the goods and ser­vices tax. Once the in­flu­ence of these fac­tors abate, the econ­omy will re­turn to a higher growth rate. The fore­cast for 2018 -19 is 7 per cent. Fur­ther re­form ini­tia­tives will con­trib­ute to achiev­ing 8 per cent plus growth.

The World Eco­nomic Out­look (WEO) has also spo­ken about the chal­lenge of de­clin­ing per capita in­come in many coun­tries...

The key chal­lenge that the IMF has been talk­ing about in the last few WEOs re­flect dif­fer­ent di­men­sions of the same prob­lem — where is em­ploy­ment go­ing to come from, what is driv­ing wages if pro­duc­tiv­ity is go­ing down... It is a very com­plex theme, which af­fects a lot of coun­tries. It is im­por­tant for coun­tries like In­dia that are in the pos­i­tive phase of their de­mo­graphic tran­si­tion to take this is­sue very se­ri­ously be­cause the de­bate in In­dia on job cre­ation has been quite prom­i­nent for a while and will re­main in the spot­light for sev­eral years.

That is a big chal­lenge…how do we cre­ate con­di­tions in this com­plex tech­no­log­i­cal world that fa­cil­i­tates job cre­ation? Can we look at the past in terms of rel­a­tively low-skilled labour in­ten­sive sec­tors as the en­gine of job growth or do we start look­ing else­where for this mo­men­tum in em­ploy­ment? These are very crit­i­cal pol­icy ques­tions for us.

The IMF Fis­cal Mon­i­tor has also looked at the ris­ing in­equal­ity and need for univer­sal ba­sic in­come...

The is­sue of jobs and the is­sue of safety nets are very closely linked. If tech­nol­ogy and mar­ket forces are putting con­straints on how many jobs can we keep, then the gov­ern­ment will have to find ways to pro­vide pro­tec­tion for reg­u­lar house­hold in­come. The Asia Pa­cific Depart­ment of the IMF re­cently made pro­jec­tions on the in­come lev­els coun­tries would reach based on the rate of age­ing. Com­pared to the US, many coun­tries will reach that tran­si­tion point at far lower lev­els of in­come. These are chal­lenges that coun­tries like In­dia will face in the next 30 to 40 years.

The time to start thinking about them and how to deal with them is now. Many coun­tries are look­ing for ways to build these safety nets. But that needs re­sources, which are also re­quired to meet more im­me­di­ate needs like in­fra­struc­ture.

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