Chief Economic Adviser has expressed hope that capital expenditure will give impetus to growth
Mumbai:
Chief Economic Adviser V Ananth Nageswaran on Friday said the government is committed to ensuring that capital expenditure continues to support the pace of economic growth after the third COVID-19 wave.
He said the government has taken several steps to strengthen the real economy including reducing taxes, continuation of privatization, setting up and managing institutions to seize bad loans and launching asset monetization drives.
“Given the ongoing sense of uncertainty among private sector participants in both the banking and non-banking worlds, the Government is committed to ensuring that capital expenditure (in a manner) continues (in such a way) that the growth impulse that We have achieved after the third wave has not surrendered,” Mr Nageswaran said while speaking at the FE Modern BFSI Summit 2022.
In the last financial year, where the capital expenditure was Rs 6 lakh crore, the government managed to spend Rs 5.92 lakh crore.
“And therefore, for the current financial year, if the government is able to execute capital expenditure of Rs 7.5 lakh crore, it is the biggest real economic intervention,” he said.
Asked what other measures should be introduced to help the real economy, Mr. Nageswaran said that the government will keep its eyes and ears open to respond to whatever situation arises but all steps have been well measured. Will go
He said any intervention in the economy has a fiscal component, which in turn impacts interest rates, current account deficit and currency.
“We need to be aware of actions with consequences and whether or not the consequences will complicate the situation. Therefore, we have to be careful when we intervene. Are we going to make the situation worse or better?” Of course, every move must be thought of for second- and third-order effects. So, therefore, everything we do next has to be measured and calibrated,” he said.
The Chief Economic Advisor further said that among all other countries, India is in a better position with respect to its mid-points in terms of inflation outlook. The country is also better than others on the growth outlook.
He said the fact that the country is now very concerned about the 7 per cent inflation rate is a good sign.
“We are becoming inflation intolerant and it is important that going forward inflation expectations are stabilized and we should be back in the range of 4-6 per cent (RBI’s inflation target) at the earliest possible opportunity as global conditions permit. So, inflation intolerance is a good thing,” Mr. Nageswaran said.
In the last two months, the Reserve Bank of India (RBI) has raised the repo rate by 90 basis points to 4.90 per cent in two tranches to rein in inflation, well above its comfort zone of 4-6 per cent.
Speaking about the banking industry, he said that the sector has a very important role to play in sustaining the current growth scenario and converting the country’s relative advantage today into a source of absolute growth advantage over other countries.
Shri Nageswaran said that after recapitalization, asset sale and balance sheet provisioning and general development, the country has a sound and well capitalized banking system.
“At present, the banking system is in good shape,” he said.
Asked whether banks, which are full of liquidity, are really keen to lend, he said lenders are providing loans but with caution.
“Naturally, there would be a source of caution on what’s happening in the world. But, given the strength of the balance sheet and the substantial provisioning and profitability, I understand both in the actual conversation and as we see in the data. Comes in. Really want to lend,” he said.