India on cusp of major economic recovery; talks of stagflation overhyped: Niti Aayog VC Rajiv Kumar

On Rising Inflation, Niti Aayog Vice-Chairman Rajiv Kumar Says RBI Is Watching Closely According To Its Mandate

On Rising Inflation, Niti Aayog Vice-Chairman Rajiv Kumar Says RBI Is Watching Closely According To Its Mandate

India is on the cusp of a major economic recovery and talks of possible stagflation have been “overhyped” as a strong economic foundation is being built with the reforms the government has implemented over the past seven years, said Rajiv Kumar, Vice-Chairman of Niti Aayog in April. 3.

Despite the economic uncertainties caused by the war between Russia and Ukraine, which also affects global supply chains, Mr Kumar claimed that it was clear from all reports that India will remain the fastest growing economy in the world.

“Given all the reforms we’ve made over the past seven years, and given that we’re hopefully seeing the end of the COVID-19 pandemic, and the 7.8% growth rate we’re going to achieve this year (2022-23) , a very strong foundation is now being laid for a further rapid increase in economic growth in the coming years,” Mr Kumar told PTIA in an interview.

According to recent government data, Asia’s third-largest economy is expected to grow by 8.9% in 2021-22. The Reserve Bank of India (RBI) has pegged economic growth at 7.8% for 2022-23.

“So I think India is on the cusp of a major economic recovery and growth,” Mr Kumar said, acknowledging that because of the war between Russia and Ukraine, India’s GDP growth could be revised.

“But even then, India will remain the fastest growing economy and all other economic parameters are actually within range,” he said.

Russia began its military offensive against Ukraine on February 24. Western countries, including the US, have imposed significant economic and various other sanctions on Russia following the offensive.

Inflation

On rising inflation, Niti Aayog’s deputy chairman said the RBI is keeping a close eye on it as per its mandate.

“I’m sure the RBI has it well under control [inflation] and will take the necessary steps if necessary,” he said.

Retail inflation reached an eight-month high of 6.07% in February, remaining above the comfort level of the RBI for the second straight month, while wholesale price-based inflation rose to 13.11% on the back of the hardening of the RBI. the prices of crude oil and non-food items .

The RBI keeps a close eye on CPI inflation as it decides on its bimonthly monetary policy.

The RBI’s Monetary Policy Committee (MPC) has been mandated to maintain annual inflation at 4% through March 31, 2026, with a maximum tolerance of 6% and a lower tolerance of 2%.

stagflation

As for concerns about the potential risk of stagflation, Mr. Kumar said the Indian economy is projected to grow by 7.8% in the current fiscal year and that this is nowhere near the definition of stagflation.

“I think this is an exaggeration because when you talk about stagflation we are talking about growth rates that are much lower than your growth rate or potential output, which is not true at all for this time,” he stressed.

Stagflation is defined as a situation where both inflation and unemployment are high and demand in the economy is also stagnant.

On meeting the government’s target of raising 88,000 crore from revenue generation in the 2021-22 fiscal year ended March 31, Mr Kumar said: “I have heard this [target] will be achieved or if not, [then we will be] very close to the target. We have a number of issues in the pipeline and a number of ministries have taken initiatives. So I think this will be right on schedule.”

Last year, Finance Minister Nirmala Sitharaman announced a ₹6 lakh crore National Monetization Pipeline (NMP) over a four-year period that will seek to unlock value in infrastructure assets in sectors ranging from energy to roads and railways.

Niti Aayog has drawn up the report on NMP in consultation with the line ministries of Infrastructure.

fuel prices

Regarding the high petrol and diesel prices, Mr Kumar said that given the global situation, fuel prices are rising all over the world. “In the past, the government had taken measures to lower the tax burden. And I think now is the time for the states to come forward if they think this should be done,” he said.

Regardless, Mr Kumar claimed, the government is closely monitoring the prices of all commodities, including fuel, and will take steps if necessary.

Rates for gasoline and diesel are rising and vary from state to state, depending on the extent to which local taxes are levied.

www.thehindu.com

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