Economic Advisor Head Krishnamurthy Subramanian was sure of strong growth in 2021-22 against the background of the second Covid-19 pandemic.
In an interview to TOI, Subramanian said inflation must immediately come in a comfortable distance.
Quotes: How do you see the current economic situation? If we see the economic impact of the second wave, there are two-three important differences.
First, the wave itself is much shorter, the rate of rise is very sharp and similar to the pace of decline equally sharp and six to eight very intense weeks.
Instead, the first wave lasts for six months.
Second, this time restrictions are all placed at the state level, they are not synchronous in time and they are also heterogeneous in their intensity.
Third, most important activities and movements between countries are not affected.
Mid-May and so on, many high frequency indicators we track start the trend again.
When you unite and other data, the overall economic impact of the second wave cannot be very large.
Finally, our growth estimate is 10.5% for the conservative budget compared to, for example, the IMF estimate is then 12.5%.
So, with the headroom created, we will not be too far, compared to our estimates.
Why is the reform in 1991 seen with a romance tinge while what is done will not be seen in the same bracket? When reform was carried out in 1991, at that time there was no romance that was bound to him.
Many people, including people in the Congress Party, made all kinds of sounds.
Once again, 30 years later, when people look back at this period, they will see it with many romansa.
Parallel I will draw from cricket.
World Cup victory Two Cricket One In1983 and the others in 2011.
The A1983 World Cup victory is very important because we have no hope at all.
At the 2011 World Cup there was hope and the team was delivered.
I saw reform in the same way – 1991 like the 1983 World Cup, from the socialist era to free market reform.
But this range of reforms is like the 2011 World Cup victory where there has been hope that we must have performance such as the Mahendra Singh Dhoni and expectations tend to be fulfilled.
Another point of parallel cricket is an inspiring leadership, whether it’s the capil Dev or Dhoni.
If you look at the last 30 years, 1991 is a crisis, 1998 is the Asian financial crisis, 2009 is a global financial crisis and now the Covid crisis.
Look at the policy response and you will understand the importance of inspiration for leadership.
After the Covid crisis, this is a recovery driven by Capex and seminal reform due to visionary leadership.
Contrast with the response after the global financial crisis.
How do you see the inflation situation? During the first wave, inflation was above 6% for nine months and it was due to the supply side friction made due to economic restrictions.
The second wave is much shorter, restrictions are much lower and that’s why when printing might come I say that I expect moderation and it must come in reach.
Lower sequential momentum and core inflation down.
Because restrictions have been removed, we must be able to get inflation numbers within reach.
High gasoline and diesel prices are a problem and people blame the government for indirect taxes of high …
food inflation (current) accounts for almost 50% of the CPI.
The weight of gasoline and diesel in the CPI basket is less than 3%.
We need to recognize that when prices rise, transportation costs rise, which increase production costs and this can cause inflation of cost encouragement, which is the second round effect.
The second round effect has the same size as the first round effect, so doubt the weight and add a little and make 6%.
Comparisons indicate that in the Indian context, food inflation is far more prominent.
What about the tax rate? Except for the US, where the car lobby is very strong, every other country has a very similar or higher tax than India.
In Italy, France, Germany and the United Kingdom, taxes on fuel accounts for more than 60% of the final consumer price.
In India, it’s 50% for diesel and 57% for gasoline.
For Spain and Japan, this proportion is similar to 53% and 47% each.
Our taxes are not prominent at all compared to the international level.