Won’t spend stim­u­lus money ‘blindly’, says Sanjeev Sanyal

Business Standard - - ECONOMY & PUBLIC AFFAIRS - SOMESH JHA New Delhi, 7 Oc­to­ber

Prin­ci­pal Eco­nomic Ad­vi­sor Sanjeev Sanyal on Wed­nes­day said the gov­ern­ment would be mind­ful of splurg­ing money in the next round of stim­u­lus, which would aim at as­set cre­ation in a bid to boost de­mand in the econ­omy.

“We are a fis­cally con­ser­va­tive gov­ern­ment as we tend to stick to the fis­cal tra­jec­tory… Our debt-to- GDP ra­tio is much lower than many coun­tries and there is a case for al­low­ing it to go up to in­flate de­mand. But we will not spend blindly. We will be care­ful of what we spend on,” said Sanyal, while speak­ing at the 115th An­nual Ses­sion of PHD Cham­ber of Com­merce and In­dus­try.

He said in­fra­struc­ture de­vel­op­ment would be an in­te­gral part of the gov­ern­ment’s de­mand re­vival ef­forts and “ex­tra-bud­getary re­sources” would be made avail­able for it.

The gov­ern­ment’s eco­nomic ad­vi­sor stressed there was no de­mand-driven in­fla­tion wit­nessed as yet in the econ­omy. “If you look at the gap be­tween the WPI (whole­sale price in­dex) and the CPI (con­sumer price in­dex), you will know that com­par­a­tively high lev­els of CPI are driven by dis­rup­tion caused by the lock­down. The ex­change rate is un­der tremen­dous pres­sure to ap­pre­ci­ate and In­dia’s cur­rent ac­count is in large sur­plus, suggest­ing we are in a po­si­tion to re­flate de­mand in­ter­nally,” he said.

At the event, Ridham De­sai, Mor­gan Stan­ley In­dia’s man­ag­ing di­rec­tor, hailed the gov­ern­ment’s lat­est re­form mea­sures, es­pe­cially farm and labour law changes, and pre­dicted that the man­u­fac­tur­ing out­put would tre­ble over the next 10 years as In­dia would be­come an at­trac­tive in­vest­ment des­ti­na­tion.

“Lack of capex has been the big­gest drag on In­dia’s growth as a ma­jor­ity of FDI (for­eign di­rect in­vest­ment) is con­cen­trated in buy­ing ex­ist­ing busi­nesses rather than set­ting up shop. The changes brought about in the form of GST, the Real Es­tate (Reg­u­la­tion and De­vel­op­ment) Act, the bank­ruptcy code, and labour and farm law changes, along with pro­duc­tion-linked in­cen­tives, will ad­dress the big is­sue in the econ­omy — capex,” said De­sai. He em­pha­sised that man­u­fac­tur­ing com­pa­nies are look­ing at di­ver­si­fy­ing their sup­ply chain and they would be ea­ger to in­vest in In­dia. “We need to con­tinue to in­vest in in­fra­struc­ture. A lot of gov­ern­ment’s fis­cal ef­forts will be on cre­at­ing in­fra — much bet­ter than doling out in­cen­tives in the form of tax breaks. I think you need to ad­dress the sup­ply side,” De­sai said.

Vet­eran banker and former chair­man of ICICI Bank K V Kamath ex­uded con­fi­dence that lend­ing through bank­ing chan­nels would go up from the third quar­ter of this fis­cal year. “Banks are as­sess­ing the im­pact of GDP slow­down on their clients. The con­fi­dence level of banks will im­prove by the sec­ond quar­ter and lend­ing should start by the third quar­ter. Lend­ing is the dharma and karma of bankers and it will hap­pen,” he said.

“OUR DEBT-TO-GDP RA­TIO IS MUCH LOWER THAN MANY COUN­TRIES AND THERE IS A CASE FOR AL­LOW­ING IT TO GO UP TO IN­FLATE DE­MAND” SANJEEV SANYAL Prin­ci­pal Eco­nomic Ad­vi­sor “THE CON­FI­DENCE LEVEL OF BANKS WILL IM­PROVE BY THE SEC­OND QUAR­TER AND LEND­ING SHOULD START BY THE THIRD QUAR­TER” K V KAMATH

Former chair­man of ICICI Bank

“A LOT OF GOV­ERN­MENT’S FIS­CAL EF­FORTS WILL BE ON CRE­AT­ING IN­FRA­STRUC­TURE – MUCH BET­TER THAN DOLING OUT IN­CEN­TIVES IN THE FORM OF TAX BREAKS”

RIDHAM DE­SAI

MD, Mor­gan Stan­ley In­dia

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