Any incautious step to gear up domestic demands in the hope of a higher growth rate at this moment may prove to be detrimental, and thus, the country should concentrate on building the supply side, observed Sanjeev Sanyal, member of the Economic Advisory Council to the Prime Minister.
Speaking at the Bharat Chamber of Commerce here on Tuesday, Sanyal said, “Growth is all about compounding, an effect which is often powerful beyond comprehension. We need to accept the current economic scenario and go slow now. Our focus should be on improving our infrastructure, building capacity, cushioning external shocks through better regulations.”
He said currently global demand is weak and therefore India’s merchandise exports have slumped. With weak export demands, there is no need to push domestic demands through stimulus as this might put stress on the external sector, causing problems in the current account deficit (CAD).
“There is macroeconomic stability in the country at present. CAD is within a reasonable range,” he said, adding in the next 18-24 months India is expected to surpass Germany and would be the fourth biggest economy in the world.
Notably, the Reserve Bank of India’s monetary policy committee (MPC) is widely expected to maintain its key rates when it meets on Thursday.
According to Sanyal, the government’s next reform agenda would be on the administrative and judicial sectors. “Since 2014, a new cycle of reforms has been put in place. In the last decade, reforms were done for an innovation-based economy. Insolvency and Bankruptcy Code (IBC) and GST were introduced, and inflation targeting started,” he said, adding now two major reforms, administrative and judicial, are needed and for that wide public support is required.
