Chief Economic Advisor (CEA) V Anantha Nageswaran on Thursday said that the Indian economy is now poised for recovery but high crude oil price is a cause for concern. The banking sector in the country is stable, capital is available and credit offtake is poised to take off, he said at a webinar organised by Bharat Chamber of Commerce.
“We are not unique to the phenomenon of uncertain growth and high inflation due to the pandemic. Developed countries are also facing the same problem,” he said.
The budget for 2022-23 has been made keeping in mind that the price of crude oil will be around USD 75 per barrel. But due to the conflict between Russia and Ukraine, the price of Texas crude is now USD 96 per barrel. “Its impact on the Indian economy will depend how long this high.price will remain,” Nageswaran said.
According to him, inflation and purchasing power is a worldwide problem. This has been due to rise in shipping costs, high container costs and high oil prices.
In India inflation rates are hovering around 5.2 per cent at the moment. “But, I feel it should remain within four to six per cent in the next fiscal which the RBI is targeting,” he said.
The CEA said the market has begun to correct in India. “Activity levels in some industries have crossed the pre-pandemic levels. But the services sector is yet to recover”.
Regarding private sector investment scenario, he said it is yet to pick up due to the pandemic cloud which is still there. It will pick up when consumption levels increase.
“But the capital expenditure plan in the budget is higher in 2022-23. This has been done to fill in the void. In fact, capital expenditure by the states have also increased” Nageswaran said.
On lower allocation towards MNREGA in the budget, he said it is a demand-driven programme. “It has been done hoping that economy will recover and the demand for MNREGA funds will drop. But if there is demand for the programme, funds will be provided for it”.
According to the CEA there are buffers in the budget. “I expect recovery to start from second half of next fiscal. The nominal GDP growth has been targeted at 11 per cent. With inflation at four per cent, the real GDP growth will be seven per cent.”
He said that for India to achieve USD five trillion economy, the share of agriculture, manufacturing and services should be in the ratio 20:30:50 in the country’s GDP.