Inflation has been rising and is at over 7 per cent as against the RBI mandated 6 per cent. This is a matter of concern as it has gone up substantially over the past three months, said Abheek Barua, Chief Economist, HDFC Bank.
This means that if one is expecting more help from the RBI, it may become difficult to come by as there will be liquidity pressure, he said.
“The fiscal deficit has gone for a toss. The government had set a target of 3.5 per cent of GDP for Centre and 3 per cent for the States. This is now at 6.5 per cent for the Centre and 4.5 per cent for States. Together it is at 11 per cent, which will be dangerous if not brought down,” he stated.
Delivering the Om Prakash Tibrewala 1st Memorial Endowment Lecture hosted by FTCCI here today, he said, “On the economic front, while the first half might have seen a contraction, the climb from the depth of a 24 per cent fall in GDP in the first quarter to much better than anticipated fall of 7.5 per cent shows that we are well on the way to a marked short-term bounce in the economy.”
He said, “In fact, while the majority of forecasters had predicted double-digit contraction just a couple of months ago, they are rapidly revising their forecasts up and seem to converging to an estimate of between 7 and 8 per cent contraction in the economy for the fiscal year.”
“The second half of this fiscal is likely to witness marginal positive growth,” he said.
“GST collections have started picking up. Demand for housing across price categories has risen as has demand for mortgages. There have been recent signs of a pick-up in investment activity, particularly road building. Construction equipment sales have picked up sharply,” he said.
Focus on employment
He suggested that India needs to embrace digitalisation and automation but has to think of employment.
“We have to think of new sectors that are not highly skill intensive but can provide mass employment. Tourism and construction are two sectors that can create jobs,” he said.