Don’t see need for downward adjustment of growth forecasts made in Budget: CEA

K.R. Srivats | | Updated on: Apr 12, 2022
Chief Economic Advisor V Anantha Nageswaran addresses the AIMA leadership conclave, in New Delhi, on Tuesday

Chief Economic Advisor V Anantha Nageswaran addresses the AIMA leadership conclave, in New Delhi, on Tuesday | Photo Credit: KAMAL NARANG

Robust balance sheet of private sector can help weather twin storms of geopolitical tension and US Fed tightening

The Finance Ministry, on Tuesday, said that the current elevated international oil price level of about $100 per barrel does not warrant any significant downward revision of economic growth forecast made for 2022-23 in the Budget. However, if global oil prices do persist at levels north of $100 per barrel for a long period, then the forecast have to be revised, said Chief Economic Advisor V Anantha Nageswaran, on Tuesday. “The assumption of $70- 75 per barrel made by survey (and Budget) was an average made for the whole year. We might still end up achieving it. We never know. It’s too premature to say that these growth forecasts are liable for a downward revision. Financial year has barely started and oil price outcome will naturally depend on not only supply coming back, but also high oil prices are a cure for high oil prices because of demand destruction that they cause,” said Nageswaran at an All India Management Association-organised event in the Capital. He also highlighted that the robust state of balance sheet within the private sector — financial or non financial — will enable the Indian economy to weather the twin storms of geopolitical tension or US federal reserve tightening, which is expected in the months ahead. “As we head to second half of 2022-23, blue skies will re appear and we can look ahead to a decade where we will be repeating in a more sustainable form the kind of high growth we experienced between 2003-2012,” he added. Nageswaran also said the recent RBI move to bring down GDP growth forecast at 7.2 per cent for 2022-23 was realistic, and that the downward risk to this number was quite limited. He pointed out that government has budgeted 11.2 per cent nominal GDP growth for 2022-23. “You can split it whichever way you like — 7+4 or 8+3 or 6.5 + 4.5 per cent. But as I said the assumptions made in Budget were around 7 per cent. It wouldn’t necessitate revision to budget projections”, he said.  In this year’s Economic Survey, the economic growth forecast was pegged at 8-8.5 per cent. “At this point of time, there are any number of scenarios we can envisage that will invalidate the Budget, but there are equally large number of scenarios that will hold the Budget numbers good,” he added. The chief economic advisor said that there has to be burden sharing between the government, oil marketing companies and retail consumers, if the global oil prices were to remain above $110 per barrel for a quarter or two. “This is a global supply shock and all have to bear the consequences of it. It is not engineered by anyone. Life is all about trade-offs. For policy response, government has used fiscal space to provide targeted relief. We need to analyse situation in a holistic manner and not only from oil taxes,” he said. Nageswaran said that government continues to balance its short-term compulsions without losing sight of long-term aspirations, macro economic stability, prudent budgeting and transparency and emphasis of capex. He highlighted that government has extended the Pradhan Mantri Garib Kalyan Yojana by six more months that had led to an additional spend of ₹80,000 crore. Because the revenue assumptions were realistic, the impact on impact on government’s ambitious capex plans would be minimal, he noted. Indian economic glass is more than half full. Because relatively speaking or even in absolute terms, we do have macro economic stability. The fact that we are all exercised CPI of 6 per cent actually attests to the success we have to our inflation targeting framework. Gone are the times when we fret about inflation only when it heads to high single digits. We are now worried about even a slight overshoot to six per cent range. We have raised the bar on ourselves as regards inflation which is a good thing. On privatisation, Nageswaran said that government’s underlying commitment to privatisation is “unwavering” even as the Centre had missed the budgeted disinvestment target for 2021-22.

Published on April 12, 2022
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