Capital investments by the private sector for setting up new capacities are showing “some signs” of picking up, but a full-fledged capex cycle is getting delayed for various reasons, chief economic adviser V Anantha Nageswaran said on Monday. “Unfortunately for us, the pandemic, commodity price increase and (high) interest rates in India and elsewhere are (preventing) the capex cycle from being in full force. It is getting delayed,” he said.
According to him, India’s economic growth is going to “somewhat moderate” to around 6.5% to 7% for the financial year 2022-23.
Financing of the trade deficit is an “important challenge” for this financial year, Nageswaran added. “As much as 85% of crude oil comes in from abroad. And, also we continue to import even consumption goods. We have also imposed export duties and export restrictions on food grains, sugar, steel and iron ore, etc. That is also holding back our export revenues. So, in that sense, financing the trade deficit is an important challenge for this year,” Nageswaran said while speaking at a virtual event organised by the Indian Chamber of Commerce (ICC).
The chief economic adviser said the Centre is expected to meet its fiscal deficit target for this fiscal. “At the moment, our expectation is the fiscal deficit target will be met,” he said replying to a question.
“As far as India is concerned, basically, if you look at where we are at 2022-23 compared to what we were expecting at the beginning of year, yes, we are going to have a low growth — 6.5% to 7%. But, this compared to many other countries of the world, is the very, very good number. Only Saudi Arabia is going to grow at rate faster than this 6.5%-7% for India,” he pointed out.
On inflation, the CEA said for India the gap between the target and reality is much lower than it is for the advanced countries. “Inflation is high. But, it is not high compared to other countries. Other countries have a target of 2%, but they have inflation rate of 8% to 10%. We have a target of 4%, but we have about 7.4% inflation rate now.”
Nageswaran said the country should allow rupee to depreciate gradually and use foreign exchange reserves “judiciously” amid global uncertainties. “What we are facing now is a multi-pronged multiple crises at all levels…even as we talk about the Indian economy, we have to understand the period of uncertainty and here we have to distinguish between risk and uncertainty. Risk is known unknowns. Uncertainty is unknown unknowns. Now we have actually a lot of unknown unknowns. “I would say basically this ‘polycrisis’ is marked by a sense of disorientation at the part of the Individual and even policy-markers at many countries. We have not experienced it before. Therefore, possibilities of fiscal, financial and geopolitical accidents are meant,” he added.