The RBI should step in to prevent further appreciation of the rupee, according to Shankar Acharya, Honorary Professor, ICRIER, and former Chief Economic Advisor.

This would help the economy in the short term, even while structural reforms such as the GST could usher in growth in the medium to long term, he said at an economic forum here organised by the Merchants’ Chamber of Commerce & Industry on Friday.

“As a short-term solution to the economy, the RBI should act now and arrest the appreciation of the rupee,” he said.

RBI’s intervention would help boost exports as well as the domestic manufacturing sector, which has been witnessing a slowdown in the last couple of quarters, he added.

The demonetisation was a rather scary experiment by the government, which brought about a slowdown in the economy, Acharya further said. “Demonetisation happened when the economy was anyway slowing down and it led to a further slowdown in economic activity, if not bringing it to a grinding halt,” he added.

While GST is a good thing in medium to long term, it will also be growth negative in the next couple of quarters, he said.

There is still uncertainty over the revenue outcome post GST, he said, adding: “Though gross revenue collection seems to be on target, net revenue collection could be lower, both for the Centre and State.”

According to Acharya, what is more worrisome is the fact that in FY18, the combined fiscal deficit of the Centre and the States would be around 7 per cent of GDP, which is very high.

“States are already in a bad situation due to farm loan waivers. So it is going to be a problem,” he pointed out.

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