NEW DELHI: The government has taken enough measures in the past one year to ensure that when the pandemic is over, the country’s economy grows by over 7%, the chief economic advisor to the government Krishnamurthy Subramanian said in an interaction with The New Indian Express. “For FY23, we expect the growth to be close to 7%, and from thereon, it will accelerate further as the impacts of the reforms are seen on the ground,” says the CEA.
He says that India was the only country, which launched a slew of reforms during the pandemic, and that too, big-ticket reforms. The reforms that he enlisted include the privatisation and asset monetisation push of the government, capex- driven growth, opening up of sectors like defence, cryptography, mining, PLI scheme, labour and farm reforms.
“When you put all these reforms together, and the 135% increase in healthcare spending and 35% increase in capex, the overall investment in the economy will go up significantly because of the crowding in effect and so will the productivity,” he says. Subramanian feels when history looks at this period, these reforms would be considered as strong as the 1991 reforms.
On the immediate impact of the second wave on the economy, the CEA says that the impact of the second wave is much lower than the first wave and hence he believes that the GDP growth in the current financial year would not be significantly lower than the Budget estimate. The government has in the Budget estimated 10.5% GDP growth, which Subramanian feels was on the conservative side, unlike IMF which had estimated 12.5%.
He termed the current financial year as a very important year for privatisation as the government is pushing through privatisation of entities like BPCL, Concor, and public listing of insurance behemoth LIC during the year. On privatisation of Air India, he said though the money that would come from Air India may not be large, it is important from a signaling perspective as it would show the government’s intent of getting out of business that it had no business being in the first place.
When asked if inflation would play a spoiler in India’s recovery, the CEA said that the over 6% inflation in the past two months were primarily because of supply-side constraints due to restrictions on economic activities. However, he feels that since the economic impact of the second wave was much lower, the inflation would start moderating soon.
Justifying the high fuel taxes, the CEA said that while evaluating the cause of high fuel prices one must also keep in mind the fact that India is not the only country where taxes account for 60% or more of the total fuel price. He said countries like the UK, Germany, Brazil, etc also have similar kind of taxes, and that taxes in India are in no way higher than those in other countries. He also blamed the rise in crude oil prices – from less than $30 to $75 – for the high oil prices.