In an interview, he told TOI that inflation is affecting demand and suggests that the government needs to continue with its capital expenditure plan while supporting the weaker sections for some more time. Part:
Recent economic data points to some moderation in activity. What is your assessment?
The economy is still in the process of recovery, this is not the time to declare victory. But, there are some things which give a very good sign. First, what we lost last year as an economy, we will more or less regain this year. Tax collection has been very good. GST has now started paying dividend. Exports, where we were stuck in the $300 billion range, are now within striking distance of $400 billion. If I look at it through a demand lens, private consumption has not yet reached the level we would all demand. And private consumption also has to do with private investment because that cycle is yet to begin the way we would like. But, there are redeeming features. Now, the problem of twin balance sheets has disappeared from our lexicon because banks have made, more or less, NPA The provisions and recapitalization themselves, and the corporates themselves, have removed. Therefore, the borrowing capacity and the lending capacity have increased significantly.
How do you fuel private consumption and demand?
Rural demand had slowed before the pandemic. But during the pandemic, for the past several quarters, it has proved very resilient. The harvest has been good, the MSP has increased and government intervention through free food supplies and direct transfer of funds has made the rural population more resilient to the kind of pandemic that we have faced. Government aid should continue because this (pandemic) is not over yet.
What are the major challenges for businesses?
Inflation has risen and, in some cases, has been unprecedented – palm oil, crude, and even tea prices are still at significantly higher levels than they were two years ago, in a country like India. This is not a phenomenon in India, it is in the whole world. This is not a demand-based, but a more supply-based constraint and, in part, this is due to speculation. In such a scenario, removal of supply chain constraints will lead to more supply and hopefully in the second half of 2022, we should start seeing volatility in commodity prices, which will be great for a country like ours . , During the intervening period, government spending has a bigger role to play. Therefore, government spending on infrastructure should not be withdrawn, and if we have the capacity, even more (should be done) as it has a multiplier effect.
What will be your major demands in the budget?
The first thing I would like is continuity of policies. When there is a certainty of policies and rates, you will want to invest money. Last year, when times were so tough, Madam Finance Minister came up with a wonderful budget. This budget should build on that.
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