New Delhi: There are “some bright spots and very dark spots” in the Indian economy and the government should target its spending “carefully” so that there is no big deficit, noted economist and former reserve Bank of India Governor Raghuram Rajan Said on Sunday.
Known for his outspoken views, Rajan also said that the government needs to do more to halt the K-shaped recovery of the economy hit by the coronavirus pandemic.
Generally, a K-shaped recovery will reflect a situation where technology and large capital firms recover at a far faster rate than small businesses and industries that have been hit hard by the pandemic.
“My biggest concern about the economy is in the minds of the middle class, the small and medium sector and our children, all of whom will come into play after the initial rebound due to a reduction in demand. One symptom of all this is weak consumption growth. , especially for mass consumption items,” Rajan told PTI in an e-mail interview.
Rajan, currently Professor University of Chicago Booth School of Businessnoted that as always, the economy has some bright spots and many dark spots.
“The bright spots are the health of large firms, the IT and IT-enabled sectors doing roaring business, including the rise of unicorns across multiple sectors and the strength of some segments of the financial sector,” he said.
On the other hand, the “dark stains” are the extent of unemployment and low purchasing power, especially among the lower middle class, the financial stress small and medium-sized firms are facing, “very weak credit growth, and sadly our Status of schooling”.
Rajan said Omicron is a setback in terms of both medical and economic activity, but cautioned the government on the possibility of a K-shaped economic recovery.
“We need to do more to prevent a K-shaped recovery as well as reduce our medium-term growth potential,” he said.
The country’s GDP is expected to grow by over 9 per cent in the current financial year ending March 31. The economy, which was hit by the pandemic, had contracted by 7.3 per cent in the last fiscal.
in front of Union BudgetRajan said the budget is supposed to be a vision document and he would like to see a plan for a five- or ten-year vision for India as well as the type of institutions and frameworks to be set up by the government.
Asked whether the government should do fiscal consolidation or continue with the stimulus measures, Rajan said India’s financial position, even when it came to the pandemic, was not good and that is why the Finance Minister Can no longer spend independently.
While the government should spend where necessary at this time to ease the pain in the most troubled sectors of the economy, he said, “we must target spending carefully so that we do not run into huge deficits.”
Finance Minister Nirmala Sitharaman The Union Budget 2022-23 is scheduled to be presented in Parliament on February 1.
Regarding rising inflationary trends, Rajan said inflation is a matter of concern in every country, and it would be difficult for India to be an exception.
According to him, setting up an independent Financial Council to consider the quality of the budget as well as announcing a credible target for the consolidated debt of the country over the next five years would be a very useful step.
“If these moves are seen as credible, the debt markets may be ready to accept a higher temporary deficit,” he said, convincing the markets that “we will be responsible, giving us future financial support.” Institutional support for consolidation should be strengthened.”
In addition, Rajan said one way to expand budgetary resources is through the sale of assets, which include shares of government enterprises and surplus government land.
“We need to be strategic about what we can sell, and how we can improve the performance of the economy through those sales…Once we decide to sell, we must move fast. , something we haven’t done so far,” he said. ,
Regarding the upcoming budget, Rajan said he would be happy to see more tariff cuts and much lower tariff hikes, and very few exemptions or subsidies to specific industries. “In particular, (i) would welcome an independent evaluation of production-linked incentive schemes”.
Known for his outspoken views, Rajan also said that the government needs to do more to halt the K-shaped recovery of the economy hit by the coronavirus pandemic.
Generally, a K-shaped recovery will reflect a situation where technology and large capital firms recover at a far faster rate than small businesses and industries that have been hit hard by the pandemic.
“My biggest concern about the economy is in the minds of the middle class, the small and medium sector and our children, all of whom will come into play after the initial rebound due to a reduction in demand. One symptom of all this is weak consumption growth. , especially for mass consumption items,” Rajan told PTI in an e-mail interview.
Rajan, currently Professor University of Chicago Booth School of Businessnoted that as always, the economy has some bright spots and many dark spots.
“The bright spots are the health of large firms, the IT and IT-enabled sectors doing roaring business, including the rise of unicorns across multiple sectors and the strength of some segments of the financial sector,” he said.
On the other hand, the “dark stains” are the extent of unemployment and low purchasing power, especially among the lower middle class, the financial stress small and medium-sized firms are facing, “very weak credit growth, and sadly our Status of schooling”.
Rajan said Omicron is a setback in terms of both medical and economic activity, but cautioned the government on the possibility of a K-shaped economic recovery.
“We need to do more to prevent a K-shaped recovery as well as reduce our medium-term growth potential,” he said.
The country’s GDP is expected to grow by over 9 per cent in the current financial year ending March 31. The economy, which was hit by the pandemic, had contracted by 7.3 per cent in the last fiscal.
in front of Union BudgetRajan said the budget is supposed to be a vision document and he would like to see a plan for a five- or ten-year vision for India as well as the type of institutions and frameworks to be set up by the government.
Asked whether the government should do fiscal consolidation or continue with the stimulus measures, Rajan said India’s financial position, even when it came to the pandemic, was not good and that is why the Finance Minister Can no longer spend independently.
While the government should spend where necessary at this time to ease the pain in the most troubled sectors of the economy, he said, “we must target spending carefully so that we do not run into huge deficits.”
Finance Minister Nirmala Sitharaman The Union Budget 2022-23 is scheduled to be presented in Parliament on February 1.
Regarding rising inflationary trends, Rajan said inflation is a matter of concern in every country, and it would be difficult for India to be an exception.
According to him, setting up an independent Financial Council to consider the quality of the budget as well as announcing a credible target for the consolidated debt of the country over the next five years would be a very useful step.
“If these moves are seen as credible, the debt markets may be ready to accept a higher temporary deficit,” he said, convincing the markets that “we will be responsible, giving us future financial support.” Institutional support for consolidation should be strengthened.”
In addition, Rajan said one way to expand budgetary resources is through the sale of assets, which include shares of government enterprises and surplus government land.
“We need to be strategic about what we can sell, and how we can improve the performance of the economy through those sales…Once we decide to sell, we must move fast. , something we haven’t done so far,” he said. ,
Regarding the upcoming budget, Rajan said he would be happy to see more tariff cuts and much lower tariff hikes, and very few exemptions or subsidies to specific industries. “In particular, (i) would welcome an independent evaluation of production-linked incentive schemes”.
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