Prominent economist Ashima Goyal said on Sunday that India is likely to have one of the highest growth rates in the world as there are gradual moves towards normalization, even as stimulus and support for vulnerable sectors continue. .
Goyal added that sticking to the consolidation path announced by the government in the next budget would give a good signal of control and predictability.
“India has emerged from a very difficult period with good macroeconomic parameters. It is expected to have one of the highest growth rates in the world, while inflation remains within the tolerance range,” he said. she declared.
Goyal, who is also a member of the RBI’s Monetary Policy Committee (MPC), said in an interview with PTI that monetary and fiscal coordination had worked well and that the stimulus measures were adequate but not excessive.
“There are gradual movements towards normalization, although some stimulus measures and support to vulnerable sectors continue,” she said, adding that the financial sector was in good health.
The RBI has lowered the growth projection for the current fiscal year to 9.5%, while the IMF has forecast growth of 9.5% in 2021 and 8.5% next year.
Faced with the threat of the new variant of COVID-19 to the economy, Goyal said the recovery is expected to be sustainable, with productivity-enhancing reforms and appropriate political support.
“The country is now much better prepared to deal with another wave, if that happens. In the second wave, the disruption to the economy was less because there are fewer supply chain disruptions with lockdowns. localized, ”she noted.
The potentially more contagious new variant B.1.1.529 (Omicron) was first reported to the World Health Organization (WHO) by South Africa on November 24.
Asked about the continuation of fiscal consolidation or the continuation of stimulus measures in the next budget, the eminent economist said that “maintaining the announced consolidation path would give a good signal of control and predictability”.
“Reforms such as greater transparency should continue,” she said, adding that this improves the credibility and accuracy of budget figures.
According to Goyal, the dynamism of revenues makes it possible to finance essential expenditure compatible with medium-term consolidation on the announced trajectory, which already provides for a certain recovery.
She noted that improving the quality of spending adds to stimulus, as does utilizing the financial sector through guarantees that do not add to current borrowing needs.
Goyal stressed that improving the quality of spending implies a shift towards high multiplier and high job creation elements such as investment, human capacity building, support to vulnerable sections and greening of the economy.
Regarding high inflation, Goyal said the high WPI reflects high import prices, especially commodity prices, which may not persist beyond the winter.
“The Covid situation makes them exceptionally volatile and multiple shocks have occurred. CPI inflation, however, remains within the tolerance band and is expected to subside next year,” she said. .
While the reduction in fuel taxes has already resulted in some reduction, Goyal said in India, because food price inflation has a greater impact, the causality tends to run from CPI inflation to WPI.
Asked about the impact of ‘taper tantrum’ or the withdrawal of monetary stimulus by the US Federal Reserve on India, Goyal said the announcement of a faster cut had not resulted in unwelcome disruptions on global markets, as they tend to accept announcements clearly related to macroeconomics. developments.
“India has a more stable macroeconomy and a larger stock of reserves than in 2013. In addition, the real interest differential is lower because US inflation is high,” she said.
According to Goyal, India is therefore in a better position to survive the exit from US monetary policy without a sharp depreciation while keeping its key rates aligned with its own domestic cycle.
Responding to a question about cryptocurrencies, she said it would be better to call them crypto-tokens because they are not acceptable or adequate as currencies and should be banned as legal tender, but regulated as tokens.
“Only large transactions, from risk-aware investors, can be allowed. A total ban is difficult to implement and would only increase illegal activity and participation in the darknet,” she said.
India is considering tabling a bill in Parliament to address the challenges posed by unregulated cryptocurrencies.
Currently, there are no specific regulations or prohibitions on the use of cryptocurrencies in the country.
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