Sanjeev Sanyal, Principal Economic Advisor in the Finance Ministry is the principal architect of the latest economic survey. He spoke to BusinessLine hours after the Economic Survey for 2020-21 was tabled in the Parliament by Finance Minister Nirmala Sitharaman.
Why have you been conservative about India GDP growth forecast of 8-8.5 per cent for 2022-23
The forecast is clear and the assumptions behind is also also very clear. We have allowed for tightening of global liquidity due to the US Fed taper. We do expect the taper will be orderly. But nevertheless we have to factor this development. Supply chains round the world are now disrupted. There will be some impact of that, too. But even at 8-8.5 per cent we will be the fastest growing economy in the world.
Considering that all the four macro data points that came today — core sector, fiscal deficit, GDP revision and GST collection — are positive and giving better picture, do you think 9.2 per cent GDP growth for current fiscal is also conservative?
I think the GDP growth projection of 9.2 per cent for the current fiscal is a reasonable estimate, given the current situation. On balance 9.2 per cent is reasonable.
You have in the Survey said that India has enough policy room to manoeuvre any monetary tightening adopted by systemically important central banks. Which are the policy options available for India?
We have, in the Survey, noted that our balance of payments are in surplus, FDI has been strong. Even if there is hot money flow out of India, we can manage given the huge reserves ($ 635 billion). This is why we need large reserves. When you have a taper-like situation, you have lots and lots of reserves to burn. So, we have a bulwark, we are looking stable and banking system is seeing Net NPA levels coming down. Our economy has the macro economic buffers to be able to deal with any liquidity withdrawal. Indeed, we did take the US Fed taper into account while doing our projection for economic growth for 2022-23.
Does the Survey have any message for the RBI as to how it should approach or deal with its loose monetary stimulus withdrawal?
Finance Ministry usually does not comment on how exactly the RBI should go about it. It is the prerogative of the RBI to take the call. We do have conversations with them, but I cannot publicly share that with you. Anyway the Survey has dealt extensively about liquidity and monetary policy in the chapter on banking in the Survey.
One expected the Survey to indicate the appropriate fiscal consolidation roadmap that the Centre should adopt in the medium term. But that seems to be missing in the Survey?
Remember that laying down the fiscal consolidation path is not the prerogative of the Economic Survey, but that is for the Finance Minister who will be presenting the Budget shortly. Please wait for few hours ...you will get a very good indication on this (fiscal consolidation roadmap).