New Delhi: The Indian economy has “some bright spots and a number of very dark stains” and the government must target the “careful” expenditure so that there is no big deficit, the word economist and former RBI Governor Rajan Rajan said on Sundays.
Known for his Frank’s views, Rajan also said the government needs to do more to prevent the K shaped economic recovery affected by the Coronavirus pandemic.
In general, K-shaped recovery will reflect the situation in which large capital technology and capital companies recover at a rate that is far faster than small businesses and industries that have been significantly affected by pandemics.
“My greater concern about the economy is a grated tissue to the middle class, the small and medium sector, and the minds of our children, all of which will play after the initial rebound because of emancing demand.
One symptom of all this is weak consumption growth, especially for goods Bulk consumption, “said Rajan to PTI in an email interview.
Rajan, currently a professor at the University of Chicago Stooth School of Business, notes that as usual, the economy has several bright places and a number of very dark stains.
“His spots are the health of large companies, roaring businesses and IT activated sectors are being carried out, including the emergence of unicorn in a number of fields, and the strength of several parts of the financial sector,” he said.
On the other hand, “dark stains” are low unemployment and purchasing power, especially among the lower middle class, medium-sized small and medium-sized financial stress, “including very warm credit growth, and tragic.
The state of our school”.
Rajan believes that Omicron is a setback, both medically and in terms of economic activity but warns the government about the possibility of the K.
“economic recovery we need to do more to prevent K shaped recovery, and the possibility of decreasing our medium-term growth potential,” he said.
The country’s GDP is expected to grow more than 9 percent in the current financial year ending on March 31.
The economy, which was significantly beaten by a pandemic, has been contracted 7.3 percent in the last fiscal.
In front of the Union budget, Rajan said that the budget should be a document that contains a vision and he will be happy to see a vision of five or ten years for India as well as plans for the types of institutions and frameworks that intend to prepare.
On whether the government must use fiscal consolidation or continue stimulus measures, Rajan shows that the fiscal situation of India, even comes to a pandemic, is not good and this is why the Minister of Finance cannot spend freely now.
While the government must spend if necessary at this time to alleviate pain in the most troubled economic area, he said, “We must target expenses carefully so that we do not carry out a large deficit.” Minister of Finance Nirmala Sitharaman is scheduled to present the Union 2022-23 budget in Parliament in February 1.
Regarding the increase in inflation trends, Rajan said inflation was a concern in every country, and it would be difficult for India to be an exception.
According to him, announcing credible targets for state consolidation debt over the next five years coupled with the settings of the independent fiscal council for opine on budget quality will be a very useful step.
“If these steps are seen by credible, the debt market may be willing to accept a higher temporary deficit,” he said, adding it to convince the market that “we will be responsible, we must strengthen institutional support for future fiscal consolidation.” Furthermore, Rajan said that one way to expand budget resources is through asset sales, including parts of government companies and government land surplus.
“We must be strategic about what we can sell, and how we can improve economic performance through the sale …
once we decide to sell, though, we have to move quickly, something we haven’t done so far,” he argued.
Regarding the upcoming budget, Rajan said that he would be happy to see more discount rates and far less tariff increases, and far fewer SOPs or subsidies for certain industries.
“In particular, (i) will welcome an independent assessment of the incentive scheme associated with production”.