The pandemic may have passed, but there is still a lot of uncertainty around the world, and India is not insulted from it, according to Bibek Debroy, Chief Economic Advisor (CEA) to the Prime Minister.
He was virtually addressing the inaugural session at the 57th annual conference of the Indian Econometric Society (TIES), held at the University of Hyderabad (UoH) here on Wednesday.
Referring to uncertainty around developments in China, the Russia-Ukraine conflict, and growth prospects in Europe and the US, the economist said: “Since India is not insulated, we will also face volatility in Forex markets and capital markets, and exchange rates will face volatility. Inflation rates will also be impacted by some uncertainty.’‘
Economic indicators after Covid 19 have improved in India. Everyone is now looking to see the rate of growth in 2023–24 and the growth of the economy by 2047. “In 2047, India will have a per capita income of the value of today’s $10,000. The average size of the GDP will also be approaching close to $20 trillion US dollars. India, therefore, will be a transformed society,” Debroy said.
Referring to a recent Goldman Sachs report that projected only a 5.5 per cent growth rate for India, he said: “Today, when India does 5.5 per cent, there is despair all around. just to illustrate how aspirations have changed. However, with 5.5 per cent growth, there has been an exponential rise in the per capita income.”
On what India needs to do to raise the growth rate from 7 to 8 per cent, the CEA said there was a need to take up more research on the requirements at the State level.
“Different States are at different levels of development, and hence the sources of growth will also be different. But the fact of the matter is that to raise the growth trajectory, we need to make land markets more efficient. Agriculture will also vastly improve when we make land markets more efficient.’‘ he pointed out.
Need of the hour
Stating that there was a need to make the labour and capital markets more efficient, Debroy said: “We need a simplified GST and a simplified system of direct tax. These are the areas on which all of us should think, and the research that we collectively produce will educate all of us and help us make much more informed policy decisions.”
In his presidential address earlier, M Ramachandran, President of TIES, said the volatility of the exchange rate was negatively associated with the official purchase of foreign exchange and also the response of volatility was larger in magnitude when the level of reserves was below the threshold level.
“On the contrary, an official sale triggers volatility regardless of whether the reserve holding is above or below the threshold level,” he added.