Kolkata:
India’s economy is now poised for recovery, but high crude oil prices are a cause for concern, Chief Economic Advisor (CEA) V Anantha Nageswaran said on Thursday.
The country’s banking sector is stable, capital is available and credit decline is about to take off, he said during a webinar hosted by the Bharat Chamber of Commerce.
“We are not unique in the phenomenon of uncertain growth and high inflation caused by the pandemic. Developed countries are also facing the same problem,” he said.
The budget for 2022-23 has been made taking into account that crude oil will be around $75 a barrel. But due to the conflict between Russia and Ukraine, the price of Texan crude oil is now USD 96 per barrel. “The impact on the Indian economy will depend on how long this high price will last,” Nageswaran said.
According to him, inflation and purchasing power is a global problem. This is due to increased shipping costs, high container costs and high oil prices.
Inflation in India is currently hovering around 5.2 percent. “But I think it should stay within four to six percent in the next fiscal year that the RBI is targeting,” he said.
The CEA said the market in India is beginning to correct. “Activity levels in some industries have surpassed pre-pandemic levels. But the service sector has yet to recover.”
Regarding the private sector investment scenario, he said it has yet to pick up due to the pandemic cloud, which is still there. It will pick up when consumption increases.
“But the investment plan in the budget is higher in 2022-23. This has been done to fill the void. Capital expenditure by the states has also increased,” said Nageswaran.
He said it is a demand-driven program with a lower allocation to MNREGA in the budget. “It has been done in the hope that the economy will recover and the demand for MNREGA funds will fall. But if there is a demand for the program, funds will be provided for it.”
According to the CEA, there are buffers in the budget. “I expect the recovery to start from the second half of next fiscal year. Nominal GDP growth has been targeted at 11 percent. With inflation at four percent, real GDP growth will be seven percent.”
He said that if India is to achieve a $5 trillion economy, its share of agriculture, manufacturing and services must be in the ratio of 20:30:50 in the country’s GDP.