Bijaynomics's Blog

Niti working on gaushala economy to address stray cattle issue, says its member

April 14, 2022 at 1:05 pm | Posted in Uncategorized | Leave a comment

New Delhi, Apr 14 (PTI) Keen on improving the gaushala (cow shelter) economy, government think-tank Niti Aayog is working on a roadmap to enable commercial use of cow dung for multiple purposes, and resolve various issues connected with stray cows which often become liability for farmers, its member Ramesh Chand has said.
The Aayog has also asked economic think tank NCAER to prepare a report on the economics of gaushalas to ensure its commercial viability.
"We are just looking at what are the possibilities to improve the gaushala economy...We are looking at the possibility that can we have some value created or value addition for the by-products, which is cow dung," he told PTI.
A team of government officials under Chand has visited big gaushalas in Vrindavan (Uttar Pradesh), Rajasthan and other parts of India to assess their conditions.
He pointed out that maybe 10 per cent or 15 per cent of cows give a small quantity of milk but that is not enough to cover labour, fodder and treatment costs.
"Cow dung can be used to make Bio-CNG...So we are looking at those kinds of possibilities," Chand, who oversees farm policies at the government think tank said.
Menace of stray cattle, abandoned by their owners, had become a major talking point in the Uttar Pradesh elections.
The NITI Aayog member highlighted the advantage of producing bio-CNG from cow dung.
"So rather than it (gas) damaging the environment, we will use it as energy which will give returns also," he argued.
The eminent agriculture economist observed that leaving unwanted cattle in the open is also harmful for crops. "That's why we are working on the gaushala economy," he asserted.
According to the National Dairy Development Board, India had 192.5 million cattle in 2019 and 109.9 million buffaloes, taking the total bovine population to 302.3 million.
Asked whether India has anything to learn from Sri Lanka, whose organic farming push aggravated the island country's economic and political crisis, Chand said Sri Lanka just decided to go for it (organic farming) for the whole country and it just said that fertiliser import etc will not be there.
"In the case of India, whenever we come with any initiative (about organic farming), you know it will happen gradually," he said.
While noting that right now because India has some surplus in food, Chand said: "We can try it (organic farming or natural farming) gradually on a small scale." PTI BKS CS

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My interview of former RBI Governor Raghuram Rajan

April 3, 2023 at 1:50 pm | Posted in Uncategorized | Leave a comment

BIZ-RAJAN-ECONOMY
India is “dangerously close” to Hindu rate of growth: Raghuram Rajan
By Bijay Kumar Singh
New Delhi, Mar 5 (PTI) Sounding a note of caution, former Reserve Bank Governor Raghuram Rajan has said that India is “dangerously close” to the Hindu rate of growth in view of subdued private sector investment, high interest rates and slowing global growth.
Rajan said that sequential slowdown in the quarterly growth, as revealed by the latest estimate of national income released by the National Statistical Office (NSO) last month, was worrying.
Hindu rate of growth is a term describing low Indian economic growth rates from the 1950s to the 1980s, which averaged around 4 per cent. The term was coined by Raj Krishna, an Indian economist, in 1978 to describe the slow growth.
The Gross Domestic Product (GDP) in the third quarter (October-December) of the current fiscal slowed to 4.4 per cent from 6.3 per cent in the second quarter (July-September) and 13.2 per cent in the first quarter (April-June).
The growth in the third quarter of the previous financial year was 5.2 per cent.
“Of course, the optimists will point to the upward revisions in past GDP numbers, but I am worried about the sequential slowdown. With the private sector unwilling to invest, the RBI still hiking rates, and global growth likely to slow later in the year, I am not sure where we find additional growth momentum,” Rajan said in an email interview to PTI.
Recently, Chief Economic Advisor V Anantha Nageswaran had attributed the subdued quarterly growth to the upward revision of estimates of national income for the past years.
The key question is what Indian growth will be in fiscal 2023-24, Rajan said, adding “I am worried that earlier we would be lucky if we hit 5 per cent growth. The latest October-December Indian GDP numbers (4.4 per cent on year ago and 1 per cent relative to the previous quarter) suggest slowing growth from the heady numbers in the first half of the year.
“My fears were not misplaced. The RBI projects an even lower 4.2 per cent for the last quarter of this fiscal. At this point, the average annual growth of the October-December quarter relative to the similar pre-pandemic quarter 3 years ago is 3.7 per cent.
“This is dangerously close to our old Hindu rate of growth! We must do better.”
The government, he said, was doing its bit on infrastructure investment but its manufacturing thrust is yet to pay dividends.
The bright spot is services, he said, adding “it seems less central to government efforts.”
On a query regarding the production-linked incentive (PLI) scheme, Rajan said any scheme in which the government pours money will create jobs and any scheme which elevates tariffs on output while offering bonuses for final units produced in India will create production in India, and exports.
“A sensible evaluation would ask how many jobs are being created and at what price per job. By the government’s own statistics, 15 per cent of the proposed investment has come in but only 3 per cent of the predicted jobs have been created. This does not sound like success, at least not yet,” Rajan said.
Furthermore, even if the scheme fully meets the government’s expectations over the next few years, it will create only 0.6 crore jobs, a small dent in the jobs India needs over the same period, the former RBI Governor said.
“Similarly, government spokespersons point to the rise in cell phone exports as evidence that the scheme is working. But if we are subsidising every cell phone that is exported, this is an obvious outcome. The key question is how much value added is done in India. It turns (out to be) very little so far,” he said.
Rajan said cell phone parts imports have also gone up, so net exports in the cell phone sector, the relevant measure that no one in government talks about, is pretty much where it was when the scheme started.
“Except, we have also spent money on subsidies. Foxconn just announced a big factory to produce parts but they have been saying they will invest for a long time. I think we need a lot more evidence before celebrating the success of the PLI scheme,” he said.
Currently, Rajan is the Katherine Dusak Miller Distinguished Service Professor of Finance at The University of Chicago Booth School of Business.
He further said the most developed economies of the world are largely service economies, so you can be a large economy without a large presence in manufacturing.
“Services do not just account for the majority of our unicorns, services can also provide a lot of semi-skilled jobs in construction, transport, tourism, retail, and hospitality.
“So let us not deride service jobs – indeed while the fraction of manufacturing jobs has stagnated in India, services have absorbed the exodus from agriculture.
“We need to work on both manufacturing and services to create the jobs we need, and fortunately, many of the inputs both (services and manufacturing) need schooling, skilling…,” he said.
On what measures the government should take to improve oversight of private family companies to address worries after the Hindenburg allegations on Adani Group, Rajan said: “I don’t think the issue is of more oversight over private companies”.
The issue is of reducing non-transparent links between government and business, and of letting, indeed encouraging, regulators do their job, he said.
“Why has SEBI not yet got to the bottom of the ownership of those Mauritius funds which have been holding and trading Adani stock? Does it need help from the investigative agencies?,” Rajan wondered.
Adani group has been under severe pressure since the US short-seller Hindenburg Research on January 24, accused it of accounting fraud and stock manipulation, allegations that the conglomerate has denied as “malicious”, “baseless” and a “calculated attack on India”. PTI BKS NKD CS DRR
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My interview of former RBI Governor D Subbarao

January 5, 2023 at 9:14 am | Posted in Uncategorized | Leave a comment

BIZ-ECONOMY-SUBBARAO
Q1 GDP growth below expectation, cause for concern: Subbarao
By Bijay Kumar Singh
New Delhi, Sep 4 (PTI) India’s GDP growth of 13.5 per cent in the April-June quarter of 2022-23 has turned out be a cause for ‘disappointment and concern’, as there was expectation of a bigger bounce back from the first quarter of last year when economic activity was crippled by the Delta wave of COVID-19, former RBI governor D Subbarao said on Sunday.
Subbarao added that risk factors for the country’s growth outlook in the short term include high commodity prices, possibility of a global recession, monetary tightening by the RBI and an uneven monsoon that could threaten crop output, especially of rice.
“The economy clocked growth of 13.5 per cent in the first quarter (April-June) of this fiscal year which would have been cause for celebration in any other circumstance.
“In the event, it’s turned out be a cause for disappointment and even concern,” he told PTI in an interview.
India’s economy expanded 13.5 per cent in the April-June quarter, the quickest pace in a year. As per the RBI’s estimates, the country’s GDP is expected to witness a growth of 7.2 per cent in the current financial year.
“Disappointment because there was expectation of a bigger bounce back from the first quarter of last year when economic activity was crippled by the Delta wave,” he said.
The GDP growth, though lower than the Reserve Bank of India (RBI) estimate of 16.2 per cent, was fuelled by consumption and signalled a revival of domestic demand, particularly in the services sector.
According to Subbarao, the GDP growth in the first quarter turned out to be a cause of concern because contrary to what the headline numbers indicate, there has in fact been a slowdown in the growth momentum which points to growth decelerating further in the quarters ahead.
Gross domestic product (GDP) growth of 13.5 per cent year-on-year compares to a 20.1 per cent expansion a year back and 4.09 per cent growth in the previous three months to March.
He observed that in order to get to USD 5 trillion over the next 4-5 years, India should be growing consistently at 8-9 per cent which requires us to be firing on all cylinders, but most of the country’s growth drivers are ebbing.
In 2019, Prime Minister Narendra Modi envisioned to make India a USD 5 trillion economy by 2024-25.
According to Subbarao, while private investment, which has been subdued for the last several years, has yet to take off, exports which drove the strong recovery last year are facing headwinds because of a global slowdown. Besides, raising public investment will be challenged by fiscal constraints.
“As a result, the sole engine that drove growth in the past quarter was private consumption which expanded robustly on account of the services sector reopening, but whether it can be sustained will depend on the benefits of growth going to the lower income segments of the population,” he argued.
To a query on weakening of the Indian rupee to a record low, Subbarao said the rupee has depreciated by about 7 per cent against the US dollar on account of capital outflows and a rising current account deficit.
Even so, the rupee has been more resilient compared to other emerging market currencies, as reflected in the broader 40 currency real effective exchange rate (REER) which is still over 100, Subbarao said.
“Rupee movement going forward will largely depend on commodity prices and financial conditions in the global economy, in particular the monetary policy stance of the US Federal Reserve,” he noted.
Asked what does rupee at 80 to a dollar mean for common Indians, he said depreciation will bring in imported inflation but it will also be expansionary in the sense that it will provide support for exports.
“The challenge for policymakers is to determine to what extent the rupee should be allowed to be a shock absorber given these conflicting objectives,” he added.
Responding to a question on the widening trade deficit, he said while export prospects will be dented by the global slowdown, the import bill will remain elevated because of high commodity prices.
“It’s axiomatic that narrowing the trade deficit will require us to raise our exports and reduce our imports,” Subbarao said, but added that this should not mean going back to the protectionist regime of the pre-reform era.
The merchandise trade deficit has been widening month on month with a record high of USD 31 billion in July, up from USD 29 billion in June, driven by falling export growth and sticky imports.
While noting that the production linked incentive (PLI) scheme is a big incentive for exports and the government should expand the sectors covered by PLI cautiously based on experience gained, he said further export incentives beyond the PLI will be inadvisable as they will breed inefficiency, besides being costly. PTI BKS ABM
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https://www.business-standard.com/article/economy-policy/q1-gdp-growth-below-expectation-cause-for-concern-ex-rbi-guv-subbarao-122090400307_1.html#:~:text=According%20to%20Subbarao%2C%20the%20GDP,further%20in%20the%20quarters%20ahead.

My interview of former NITI Aayog member Rajiv Kumar

January 5, 2023 at 9:12 am | Posted in Uncategorized | Leave a comment

No prospect of recession in India, economy to grow 6-7 pc in next fiscal: Rajiv Kumar
By Bijay Kumar Singh
New Delhi, Nov 20 (PTI) India will still grow at 6-7 per cent in the next 2023-24 fiscal even as the economy may be affected by uncertain global conditions, former Niti Aayog Vice-Chairman Rajiv Kumar has said amid growing fears of the world slipping into a recession.
Kumar further said there is a synchronized downturn in the US, Europe, Japan and also in China and that could take the global economy into a recession in the coming months.
“Thankfully, there is no such prospect of recession in India, because although our growth may be negatively affected by the global conditions, we will still manage to grow at 6-7 per cent in 2023-24,” he told PTI in an interview.
The World Bank on October 6 projected a 6.5 per cent growth rate for the Indian economy for 2022-23, a drop of one percentage point from its June 2022 projections, citing the deteriorating international environment, while IMF projected a growth rate of 6.8 per cent in 2022 as compared to 8.7 per cent in 2021 for India.
IMF chief Kristalina Georgieva has said the global economy is moving from a world of relative predictability to one of greater uncertainty.
Replying to a question on high inflation, Kumar said retail inflation will probably be in the range of 6-7 per cent for some more time.
“After that, my estimate is that it should begin to peak and then come down,” he said.
Kumar added that depends a lot on global oil prices as it can continue to rise because of the continued conflict in Ukraine.
“But otherwise domestic drivers of inflation will cool down,” he noted.
Indicating easing of the price situation, retail inflation moderated to 6.7 per cent in October while the wholesale price index fell to a 19-month low mainly on account of subdued rates of food items.
The central bank is mandated to keep inflation at 4 per cent with 2 per cent of upside and downside margins.
Asked about the impact of a weakening Indian rupee on the common man, the former Niti Aayog vice chairman said the common Indian does not use a lot of imported goods or services in their consumption basket.
According to Kumar, the rupee which is near its real value is much better for the economy than the appreciated rupee and depreciated rupee doesn’t pose many downside risks.
The rupee depreciated 6 paise to close at 81.74 against the US dollar on Friday.
On India’s widening trade deficit, Kumar said with the negative growth of exports in October, it is clear that the country needs a real policy focus on this area on how to expand its exports of both goods and services.
“We need to now formulate state-specific export promotion policies. Because to have one single export promotion policy for the whole country does not make sense,” he said.
Elaborating further, he said that like Punjab is a double landlocked state and Tamil Nadu is a coastal state, and it has centuries of trading experience. “So, to have the same policies of both those states, for example, is not relevant,” he emphasised.
India’s exports entered negative territory after a gap of about two years, declining sharply by 16.65 per cent to USD 29.78 billion in October, mainly due to global demand slowdown, even as the trade deficit widened to USD 26.91 billion.
Imports during the month under review rose by about 6 per cent to USD 56.69 billion on account of increase in the inbound shipments of crude oil and certain raw materials such as cotton, fertiliser and machinery.
Responding to a question on some states switching to the old pension scheme (OPS), Kumar said, “That’s a backward step. and I don’t think that should be taken.”
He opined that it is being advocated by some opposition parties because of populist measures.
“I think the Indian economy, the Indian working class, Indian middle class is maturing and can handle their own pension funds and take advantage of the new pension scheme, which offers much more choices than the old pension scheme,” Kumar said.
Punjab cabinet on Friday approved the reimplementation of the old pension scheme, which was discontinued in 2004. PTI BKS MR
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https://economictimes.indiatimes.com/news/economy/policy/no-prospect-of-recession-in-india-economy-to-grow-6-7-pc-in-next-fiscal-rajiv-kumar/articleshow/95636781.cms

My interview of eminent economist Arvind Panagariya

January 5, 2023 at 9:08 am | Posted in Uncategorized | Leave a comment

Arvind Panagariya cautions against cutting trade ties with China
New Delhi, Dec 22 (PTI) Amid demands for snapping trade ties with China for its transgressions on the border, former Niti Aayog Vice Chairman Arvind Panagariya has opined that cutting trade with Beijing at this juncture would amount to sacrificing India’s potential economic growth.
Instead, Panagariya suggested that India should try to enter into free trade agreements (FTA) with countries such as the UK and the European Union to expand its trade.
“Engaging China in a trade war at this juncture will mean sacrificing a considerable part of our potential growth… purely on economic grounds, it will be unwise to take any action in response to it (transgressions on the border),” the eminent economist told PTI.
Indian and Chinese troops clashed along the Line of Actual Control (LAC) in the Tawang sector of Arunachal Pradesh on December 9 and the face-off resulted in “minor injuries to a few personnel from both sides”, according to the Indian Army.
Panagariya, currently a professor of economics at Columbia University, said both countries can play the trade sanctions game but the ability of a USD 17 trillion economy (China) to inflict injury on a USD 3 trillion economy (India) is far greater than the reverse.
“Now there are some who want trade sanctions on China to ‘punish’ it for its transgressions on the border… if we try to punish China, it will not sit back, as amply illustrated by its response to sanctions by even the mighty United States,” he observed.
Panagariya pointed out that even a large economy such as the US has not been very successful with its sanctions either against China or even Russia.
“Its close ally, EU, has had to pay a very high price of the sanctions against Russia (GDP: USD 1.8 trillion only). So, this is a very slippery slope,” he observed.
The trade deficit, the difference between imports and exports, between India and China touched USD 51.5 billion during April-October this fiscal. The deficit during 2021-22 had jumped to USD 73.31 billion as compared to 44.03 billion in 2020-21, according to the latest government data
According to the data, imports during April-October this fiscal stood at USD 60.27 billion, while exports aggregated at USD 8.77 billion.
Explaining further, Panagariya said it so happens that for many products India imports, China is the cheapest supplier so New Delhi buys them from Beijing.
It also happens that for goods India wants to export, China does not offer New Delhi the best price.
“So, we sell them to other trade partners such as the US. The fact that this results in a trade deficit with China and trade surplus with the US should be no reason for worry,” Panagariya said.
To reduce the trade deficit with China, Panagariya suggested that the idea ought to expand trade faster with other trading partners rather than cutting it with Beijing through a blunt instrument such as trade sanctions.
” We should take advantage of India’s excellent growth prospects for the next decade and concentrate on growing the economy bigger as fast as possible. Once we are the third largest economy, our sanctions threats are likely to carry greater credibility,” he said.
Asked can India tame its widening overall trade deficit, he said the appropriate indicator of external imbalance from the viewpoint of macroeconomic and financial stability is the current-account deficit as it measures the increase in our liabilities abroad.
According to Panagariya, while movements in the current-account balance give him no reason for concern, as a fast-growing economy, it is even desirable for India to borrow up to 2 to 3 per cent of GDP abroad to finance its investments.
“We may end up with a current-account deficit between 2 to 3 per cent in the current fiscal years but this too is well within our tolerance limit and poses no threat to macroeconomic stability,” he noted.
In 2020-21, India had a current-account surplus of 0.9 per cent of the GDP while in 2021-22, India had a current-account deficit of 1.2 per cent of the GDP. PTI BKS CS MR
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https://economictimes.indiatimes.com/news/economy/foreign-trade/arvind-panagariya-cautions-against-cutting-trade-ties-with-china/articleshow/96416922.cms

Indian economy likely to grow at over 7 pc in FY23: Panagariya
By Bijay Kumar Singh
New Delhi, Dec 21 (PTI) The Indian economy is likely to grow at over 7 per cent in the current fiscal year, former Niti Aayog vice chairman Arvind Panagariya said on Wednesday, while observing that the growth rate should sustain next year too provided the forthcoming Budget does not have any negative surprises.
Panagariya further said recessionary fears have been around for a while but so far neither the US nor the EU has gone into recession.
“From the viewpoint of India, in terms of headwinds originating abroad, the worst is probably behind us,” he told PTI.
Earlier this month, the RBI revised down its growth estimate for FY23 to 6.8 per cent from the earlier 7 per cent, while the World Bank revised upwards its GDP growth forecast to 6.9 per cent, saying the economy was showing higher resilience to global shocks.
“Overall, I still expect us to end the current fiscal year with a growth rate exceeding 7 per cent. Next year, the 7 per cent growth rate should sustain assuming the forthcoming Budget does not have any negative surprises,” the eminent economist said. Panagariya said capital outflows induced by the hikes in policy rates by the US Fed Reserve had placed the rupee under considerable pressure.
“Those flows have reversed with positive net portfolio inflows in November,” he said, adding that inflation in the US is also coming down, suggesting the worst may be over in that country as well.
But in the meantime, according to Panagariya, the rupee has appreciated against currencies such as the Euro and Yen which may contribute to weakness in exports in the coming year.
Even prior to this episode, the rupee had been overvalued, he added.
“So, I would lean in favour of further depreciation of the rupee against the dollar,” Panagariya, currently a professor of economics at the Columbia University, said.
Replying to a question on unemployment, Panagariya said going by the Periodic Labour Force Survey (PLFS), which is the most reliable household survey available, he does not see that the unemployment rate is high.
“Higher unemployment among the youth is not a new phenomenon. This rate has always been higher than the overall rate because youth do not take the first job they are offered. Instead, they wait in the hope of getting a better offer,” he argued.
Panagariya also pointed out that in recent years, due to rising urban incomes, parents are able to support their children for longer.
“As a result, the waiting period has become longer, which has resulted in an upward shift in this rate,” he said, but pointed out that as per PLFS, the unemployment rate among those aged 15 to 29 years has fallen from 20.6 per cent in 2017-18 to 18.5 per cent in 2020-21.
To buttress his argument, Panagariya said that based on usual status measure, unemployment rate stood at 4.2 per cent in 2020-21 compared to 6.1 per cent in 2017-18.
Noting that EPFO data also show a robust rising trend in net additions to its rolls, suggesting formalisation of the workforce at an accelerated pace, he said, “Compared with less than 8 million additions in each of the three preceding years, net additions in 2021-22 were 12 million.”
In the first half of 2022-23, net additions have already reached 8.7 million, he added. PTI BKS BKS ABM

https://www.financialexpress.com/economy/indian-economy-likely-to-grow-at-over-7-pc-in-fy23-arvind-panagariya/2922281/#:~:text=The%20Indian%20economy%20is%20likely,not%20have%20any%20negative%20surprises.

My interview of RBI MPC member

January 5, 2023 at 9:06 am | Posted in Uncategorized | Leave a comment

India economic growth ‘extremely fragile’, needs all support, says RBI MPC member
By Bijay Kumar Singh
New Delhi, Dec 23 (PTI) India’s economic growth is now ‘extremely fragile’ and needs all the support that it can get, as private consumption and capital investment are yet to pick up, RBI Monetary Policy Committee (MPC) member Jayanth R Varma said on Friday.
Varma further said out of the four engines of growth for the economy, exports and government spending supported the Indian economy through the pandemic, but other engines need to pick up the baton now.
” I like to think in terms of the four engines of growth for the economy: exports, government spending, capital investment and private consumption.
“…while exports cannot be the main driver of growth because of the global slowdown, government spending is necessarily limited by fiscal constraints,” he told PTI.
Observing that experts are waiting for many years for private investment to pick up the slack Varma said that concerns about future growth prospects appear to be deterring capital investment.
“The critical question is whether the fourth engine of private consumption will remain buoyant after the pent-up demand dissipates over the coming months.
“I, therefore, fear that economic growth is now extremely fragile and needs all the support that it can get,” he said.
Earlier this month, the RBI revised its growth estimate for FY23 to 6.8 per cent from the earlier 7 per cent, while the World Bank revised upwards its GDP growth forecast to 6.9 per cent, saying the economy was showing higher resilience to global shocks.
Varma, a professor at the Indian Institute of Management (Ahmedabad), however, asserted that India does not face a threat of recession unlike many other countries of the world.
“In fact, the Indian economy is faring better than most other large economies in the world today,” he said, adding that the problem is that India’s aspiration level is also higher, particularly after two lost years due to the pandemic.
Varma pointed out that India is enjoying the benefits of a demographic dividend, and it, therefore, needs high growth to provide employment opportunities for the young people joining the workforce.
“I do not fear that India will grow slower than the rest of the world. I fear that we may grow slower than our own aspirations and our own needs,” he said.
Replying to a question on inflation, Varma said his personal view is that one of the reasons the RBI failed to contain inflation within its tolerance band for 10 months, was because the MPC consciously prioritized economic recovery over inflation during the pandemic.
“Given its dual mandate to maintain price stability while keeping in mind the objective of growth, I think this was the correct response to a once in a century pandemic,” he opined.
According to Varma, by mid-2021, the COVID-19 pandemic had ceased to be an economic catastrophe while remaining a health tragedy, and this was the right time to begin the normalization of monetary policy.
“Second, in my view, we persisted in this longer than we should have…Given that monetary policy acts with lags, much of what we are seeing in 2022 is the result of the inaction during that period,” he emphasised.
Varma, however, added that even this delay by itself would not have been sufficient to cause the inflationary episode of this year.
The Reserve Bank this month expectedly raised the benchmark lending rate by 35 basis points (bps) – the fifth increase since May.
Prior to the December hike in repo rate, the RBI had raised the key short-term lending rate by 190 bps in four tranches.
The third critical reason, he said, was that the supply disruptions from the Ukraine war created an unexpected inflationary shock, and this shock hit India before the MPC had normalized the monetary policy.
The inflation print for November has come under 6 per cent, within the tolerance band for the first time after 10 months. The RBI had earlier written a letter to the government outlining reasons for missing the 6 per cent inflation target for three straight quarters.
The central bank has been tasked by the government to ensure that retail inflation remains within the range of 2-6 per cent.
Asked whether India can tame it’s widening trade deficit, Varma said the monetary tightening that has been undertaken to bring down inflation will have the effect of depressing demand and will indirectly curb imports.
Noting that the depreciation of the currency this year will also tend to reduce the current account deficit with a lag, he said, “finally, the level of this deficit is within manageable limits, and I do not see it as a cause for worry.”
India’s exports recorded a flat growth of 0.59 per cent to USD 31.99 billion in November, even as trade deficit widened to USD 23.89 billion during the month.
Asked should the government cut taxes on petrol and diesel as global crude oil prices have come down, he said the fall in global crude oil prices is definitely very good news for India and will help in bringing down inflation.
Varma said it is well understood that there are lags in the transmission of global energy prices to domestic prices in both directions, but monetary policy looks 3-4 quarters ahead.
“Over this time frame, I do expect significant pass through of global crude prices to retail prices,” he said. PTI BKS CS MR

https://timesofindia.indiatimes.com/business/india-business/india-economic-growth-extremely-fragile-needs-all-support-says-rbi-mpc-member/articleshow/96458517.cms

My interview of Shipping Minister Sarbananda Sonowal

January 5, 2023 at 9:03 am | Posted in Uncategorized | Leave a comment

BIZ-SONOWAL-PROJECTS
Govt has pipeline of 44 port projects worth Rs 22,900 cr till 2024-25: Sarbananda Sonowal
By Bijay Kumar Singh
New Delhi, Jan 3 (PTI) Public-private partnership in port infrastructure has been an important source of investment in the sector and the Ministry of Ports, Shipping and Waterways (MoPSW) has a pipeline of 44 projects for total investment of Rs 22,900 crore till 2024-25, Union Minister Sarbananda Sonowal said on Tuesday.
Moreover, the government is working on the guidelines for dealing with stressed public-private partnership (PPP) projects at major ports and has also come up with policies to support the shipbuilding industry in India, Sonowal said.
“The Ministry of Port, Shipping and Waterways is working on two fronts to encourage private sector participation… On the project front the ministry has a pipeline of 44 projects for a total investment of Rs 22,900 crore till 2024-25,” he told PTI.
On the policy front, the ministry is working on the Guidelines for dealing with stressed PPP projects at major ports, Sonowal said.
The Ports, Shipping and Waterways minister further said that under the National Monetization Pipeline (NMP), MoPSW has accorded approval to 22 projects worth Rs 12,222 crore. Out of the 22 projects, seven projects worth Rs 5,278 crore have already been awarded on PPP mode, rest projects are in various stages of bidding, he added.
According to him, the ministry is also working on the Captive Policy and Migration Policy (to new MCA and Tariff regime) to improve the ease of doing business and provide a conducive environment for private sector investments in the port sector.
Sonowal said under the PM Gati Shakti National Master Plan, MoPSW has identified 101 projects worth Rs 56,831 crore for implementation by 2024. “Out of these, 13 projects worth Rs 4,423 crore have been completed,” he said, adding that 9 projects worth Rs 716 crore are expected to be completed by March 2023.
The Ports, Shipping and Waterways ministry has identified 9 High Impact Projects (HIP) and these have been uploaded in the Project Monitoring Group (PMG) portal and are being monitored at the Cabinet Secretariat level. Three HIP projects are already completed, he added.
Sonowal further said, apart from completing port modernisation and port connectivity projects, the ministry is expediting various projects under the Sagarmala programme related to RoRo/Ropax and passenger jetty facilities, and fishing harbor projects to improve the connectivity and livelihood of people living in coastal areas.
He said National Maritime Heritage Complex (NMHC) at Lothal is being developed as one of its kind projects to display India’s rich and diverse maritime heritage and the project is currently under implementation and all efforts are being undertaken to complete the first phase of this project by the end of 2023.
Sonowal said 191 port connectivity projects have been identified after coordination with the Ministry of Road Transport and Highways (MoRTH) and railways ministries under Sagarmala which are in various stages of implementation and development.
Replying to a question on demand for restoration of subsidy for moving goods through Inland waterways in the NorthEast region, Sonowal said the earlier scheme of subsidy for moving goods through Inland waterways in the NorthEast region, was launched by Ministry of Commerce and Industry (MoCI) which was closed on March 31, 2022.
“However, in order to promote this mode of transport and to meet first mile, last mile and multiple handling of cargo issues while transporting through IWT mode, MoPSW will take up the matter for restoration of the scheme with MoCI for promoting the movement of goods through Inland waterways in the NorthEast region,” he said. PTI BKS DRR
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https://economictimes.indiatimes.com/industry/transportation/shipping-/-transport/govt-has-pipeline-of-44-port-projects-worth-rs-22900-cr-till-2024-25-sarbananda-sonowal/articleshow/96700280.cms

My interview of RBI MPC members

November 7, 2022 at 2:11 pm | Posted in Uncategorized | Leave a comment

RBI rate hikes to contain price rise; inflation to fall below 6pc next year
By Bijay Kumar Singh
New Delhi, Oct 19 (PTI) RBI Monetary Policy Committee (MPC) member Ashima Goyal on Wednesday said that the efforts of the Reserve Bank to contain price rise by repeatedly increasing interest rates will help in containing inflation, which is likely to fall below 6 per cent next year.
Goyal further said that the policy rate hikes have largely reversed pandemic-time cuts but the real rate remains low enough not to hurt the growth recovery.
“With a lag of two-three quarters, higher real rates will reduce demand in the economy.
“International commodity prices are softening with the global slowdown and supply chain bottlenecks have reduced,” she told PTI in a telephonic interview.
In order to control rising inflation, the RBI on September 30, raised the short-term lending rate for the third consecutive time by 50 bps to take the repo rate to 5.9 per cent. Since May it has cumulatively increased the key interest rate by 190 basis points.
“The Indian government is also taking action to reduce supply-side inflation. Current projections show inflation falling below 6 per cent next year,” Goyal said.
The central bank is mandated to keep inflation at 4 per cent with a 2 per cent margin on either side.
According to Goyal, a mildly positive real interest rate can act to reduce inflation, with supportive supply-side action, while imposing minimal growth sacrifice.
She noted that today the forward-looking real interest rate is positive and such a rapid response in an inflation targeting regime to inflation exceeding tolerance bands, helps anchor inflation expectations.
India’s consumer price index (CPI) based inflation in September rose to a five-month high of 7.41 per cent, remaining well above the upper tolerance level of RBI’s inflation targeting framework for the ninth consecutive month.
Replying to a question on the Indian rupee touching a historic low, Goyal pointed out that a more depreciated rupee makes imports more expensive and hurts those who have borrowed abroad but may raise returns for some exporters.
While observing that lower imports and higher exports can help reduce the current account deficit, she said the dollar is strengthening against all currencies as rising Fed rates attract funds back to the US.
“But INR depreciation is less than most other advanced and emerging markets and equity inflows have returned recently,” she said, adding that since the INR is market-determined, this means markets are factoring in India’s better prospects and lower inflation.
Emphasising that the fall in Indian equity prices is less than in other countries which shows market confidence in India, she said forex reserves have fallen mostly because of valuation effects.
Recently, finance minister Nirmala Sitharaman said that the rupee has not weakened but it is the dollar that has strengthened, as she defended the 8 per cent slide in the value of Indian currency against the greenback this year.
The rupee on Wednesday fell below the 83 level against the US dollar for the first time due to foreign fund outflows.
To a question on fear of recession all over the globe, Goyal opined that a global slowdown will affect a connected India negatively.
“But India has a large domestic market. Its size, diversity, policy space and financial sector strength will continue to give it good positive growth,” she said.
Goyal pointed out that corporates have reduced debt over the last decade and the financial sector is well-capitalized.”All this lowers contagion risk for India,” she said.
IMF chief Kristalina Georgieva has recently said the global economy is moving from a world of relative predictability to one of greater uncertainty.
The World Bank on October 6 projected 6.5 per cent growth rate for the Indian economy for 2022-23, a drop of one percentage point from its June 2022 projections, citing the deteriorating international environment, while IMF projected a growth rate of 6.8 per cent in 2022 as compared to 8.7 per cent in 2021 for India

https://economictimes.indiatimes.com/news/economy/policy/rbi-rate-hikes-to-contain-price-rise-inflation-to-fall-below-6pc-next-year/articleshow/94966498.cms

Impact of monetary policy tightening on inflation to be felt after 5-6 quarters: Varma
(Eds: Adding quotes)
By Bijay Kumar Singh
New Delhi, Oct 17 (PTI) RBI Monetary Policy Committee (MPC) member Jayanth R Varma on Monday said that the impact of monetary policy tightening on inflation will be felt after five to six quarters.
The central bank is mandated to keep inflation at 4 per cent with 2 per cent of upside and downside margins.
In order to control rising inflation, the RBI on September 30, has raised short-term lending rate for the third consecutive time by 50 bps to take the repo rate to 5.9 per cent.
Since May it has cumulatively increased the key interest rate by 190 basis points.
“No doubt it (inflation) will come down. Because we have done monetary policy tightening.
“That tightening will have its impact. The monetary policy takes, you know, five to six quarters to have its impact and cool prices,” he told PTI in a telephonic interview.
India’s consumer price index (CPI) based inflation in September rose to five-month high of 7.41 per cent from 7 per cent recorded in the preceding month, with the print remaining well above the upper tolerance level of RBI’s inflation targeting framework for the ninth consecutive month.
“We started only in April. We will start seeing the effect of that tightening later in the year.
Varma, currently a professor of Indian Institute of Management (Ahmedabad), noted that India’s economic growth has actually been depressed for many years now.
“We are not fearing recession to say but growth is not what we would like,” Varma said.
The World Bank on October 6 projected 6.5 per cent growth rate for the Indian economy for 2022-23, a drop of one percentage point from its June 2022 projections, citing deteriorating international environment, while IMF projected a growth rate of 6.8 per cent in 2022 as compared to 8.7 per cent in 2021 for India.
“So, that is the dual challenge. Economic growth is below what we would like, inflation is higher than what we would like, and that poses a difficult challenge for the monetary policy,” the eminent economist emphasised.
He said that the Monetary Policy Committee is prioritising inflation right now, and trying to bring inflation under control and then move from that.
IMF chief Kristalina Georgieva has said the global economy is moving from a world of relative predictability to one of greater uncertainty.
On the Indian rupee touching a historic low, Varma pointed out that the US dollar is strengthening against almost every currency.
Noting that the US economy is doing pretty well, he said that the combination of economic growth plus tight monetary policy will tend to appreciate the dollar, “which is what we have seen in the past as well”.
“The danger is much higher when the rupee is weak than when the dollar is strong,” he said.
When asked whether RBI should defend the rupee, he said his personal view is that “how you deal with when the dollar strengthens is different from how you deal with when the rupee weakens. They are two very different phenomena which require different responses”.
Finance minister Nirmala Sitharaman has also said that the rupee has not weakened but it is the dollar that has strengthened, as she defended the 8 per cent slide in the value of Indian currency against the greenback this year.
The rupee is hovering around 82.30 against the US dollar.
Some analysts say the central bank may have spent nearly USD 100 billion in the past year to defend the rupee.
Asked whether the RBI have expertise and infrastructure to launch the Central Bank Digital Currency(CBDC), Varma said the central bank is not going to do anything in isolation. It is going to use multiple organs at its disposal.
“It is going to use the the infrastructure of the commercial banks. It is going to use the infrastructure in NPCI .
“So, there is a lot of expertise, there is a lot of infrastructure already there,” he said.
Last week, the Reserve Bank had said it will soon commence the pilot launch of e-rupee for specific use cases with a view to bolstering India’s digital economy, making payment systems more efficient and checking money laundering.
In a concept note on Central Bank Digital Currency, the RBI said CBDC is aimed to complement, rather than replace, current forms of money and is envisaged to provide an additional payment avenue to users, not to replace the existing payment systems.
CBDC is a digital form of currency notes issued by a central bank. While most central banks across the globe are exploring the issuance of CBDC, the key motivations for its issuance are specific to each country’s unique requirements. PTI BKS CS HVA
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Impact of monetary policy tightening on inflation to be felt after 5-6 quarters: Varma

https://timesofindia.indiatimes.com/business/india-business/impact-of-monetary-policy-tightening-on-inflation-to-be-felt-after-5-6-quarters-jayanth-varma/articleshow/94925733.cms#:~:text=NEW%20DELHI%3A%20RBI%20Monetary%20Policy,of%20upside%20and%20downside%20margins.

Open-ended’ freebies should be discouraged, amount can be used for infra, health: Sanjeev Sanyal
By Bijay Kumar Singh
New Delhi, Oct 11 (PTI) Economic Advisory Council to the Prime Minister (EAC-PM) member Sanjeev Sanyal has said that ‘open-ended’ freebies should be ‘discouraged’ as the amount can be utilised for building infrastructure, or investing in the health sector.
Sanyal, however, added there is a need for targeted-subsidies, as it helps the poor in the time of need, as it happened during the COVID-19 pandemic period.
“We do need to target absolute poverty, but open-ended freebies are certainly something we should not encourage,” he told PTI.
Sanyal said that there is a price to pay eventually for open-ended subsidies like free electricity or something that’s not properly targeted.
“… The money that is spent on those particular open-ended freebies is something that can be spent on doing other things whether it’s building infrastructure, or investing in the health sector,” Sanyal opined.
Last week, the Election Commission wrote to political parties to provide authentic information to the voters to assess the financial viability of their election promises and also sought their views on the issue.
The EC has said it cannot overlook inadequate disclosures on election promises and consequential undesirable impact on financial sustainability as empty poll promises have far-reaching ramifications.
Prime Minister Narendra Modi in the recent past had hit out at the competitive populism of extending ‘rewaris’ (freebies) and said that these are not just wastage of taxpayers’ money but also an economic disaster that could hamper India’s drive to become atmanirbhar (self-reliant).
His comments were seen directed at parties like the Aam Aadmi Party (AAP) which have in the run-up to assembly elections in states like Punjab and more recently Gujarat promised free electricity and water, among others.
Replying to a question on unemployment, Sanyal asserted that unemployment rates are in fact coming down and job creation has been strong.
“Sustaining growth over long periods of time is critical to creating jobs,” he said, adding that he is not one of those who believes that jobless growth is the real enemy.
While emphasising that there is a need to create incentives particularly to allow scaling up of sectors where job creation can happen, Sanyal said there is a case to push for production-linked incentive (PLI) scheme in the services sector where a lot of jobs can be created.
The government has announced PLI schemes for 14 sectors, including white goods, textiles and auto components to make domestic manufacturing globally competitive, create global champions in manufacturing, boost exports and create jobs. Sanyal argued that India is in a good position to be able to deal with issues related to jobs for the next few years.
Earlier this month, RSS general secretary Dattatreya Hosabale expressed concern over alleged rising income inequality and unemployment in the country, asserting that poverty is posing as a “demon-like challenge in front of us.”
However, Hosabale had said several steps have been taken in the last few years to address this challenge.
To a question on India’s widening trade deficit, Sanyal said that it is due to external factors.
“The trade deficit, although it has gone up, has gone up for reasons I think that are manageable,” he said, adding that India’s current account will be smaller because its services exports are doing well.
India’s trade deficit widened to USD 26.72 billion in September, while exports contracted by 3.52 per cent to US 32.62 billion.
According to Sanyal, after a short reversal, portfolio inflows are also happening and FDI has continued to be strong throughout the whole phase. “So I don’t think we have an external financing problem of any matter,” he asserted.
On Prime Minister Narendra Modi’s ambitious target of making India a developed nation by 2047, Sayal said the target requires hard work but it is feasible.
“Well, one of the key things is compounding of growth. So the whole approach is related to how you can sustain and compound growth rates,” he said. PTI BKS CS DRR
1110 1050

https://economictimes.indiatimes.com/news/economy/policy/open-ended-freebies-should-be-discouraged-amount-can-be-used-for-infrastructure-health-development-says-sanjeev-sanyal/articleshow/94777206.cms

India will stand out with 7 pc growth rate in FY23 amid global gloom, says EAC-PM member Sanyal
By Bijay Kumar Singh
New Delhi, Oct 9 (PTI) Amid fears of the world slipping into recession, India will perhaps emerge as the strongest major economy with 7 per cent growth rate in FY23, Economic Advisory Council to the Prime Minister (EAC-PM) member Sanjeev Sanyal said on Sunday.
Sanyal observed that India can grow at 9 per cent in an external conducive environment like in early 2000s when the global economy was growing.
“We are clearly entering an environment where many countries around the world will be facing much slower growth or even slipping into recession.
“This is due to a combination of factors ranging from tighter monetary policy to higher energy costs, as well as disruptions caused by the Ukraine war,” he told PTI in an interview.
The World Bank on October 6 projected 6.5 per cent growth rate for the Indian economy for 2022-23, a drop of one percentage point from its June 2022 projections, citing deteriorating international environment.
“Under those circumstances, India’s performance will stand out as being perhaps the strongest of any major economy in the world with around 7 per cent GDP growth rate in current fiscal year nonetheless,” Sanyal said.
He emphasised that the cumulative impact of supply side reforms over many years by the Modi government has meant that India’s economy is currently much more flexible and resilient than it used to be.
Sanyal noted that if India gets an external environment like the one it had during 2002-03 to 2006-07 when the global economy was growing, global inflationary pressures were muted, then its economy is capable of delivering 9 per cent growth.
“But obviously, we are not in that environment right now. So given that situation 7 per cent GDP growth rate is a good performance,” he said.
The EAC-PM member however cautioned against pushing growth unnecessarily “when the highway has so many bumps and hurdles in the way”.
The Reserve Bank of India recently slashed the growth projection to 7 per cent for current fiscal year from the earlier forecast of 7.2 per cent, citing aggressive tightening of monetary policies globally and moderation in demand.
On the Indian rupee touching a historic low last week, Sanyal said,”I don’t think we should get too fussed about looking at just the dollar INR exchange rate.”
According to Sanyal, there is obviously a very sharp strengthening of the US dollar against all currencies and in that circumstance, the rupee actually is appreciating against all currencies except dollar.
Noting that the Reserve Bank is correct in allowing the rupee to find its level while at the same time using the reserves to smoothen the volatility, he said ” the central bank should not defend a particular level, it should however, use its reserves to control volatility.
The rupee hit a historic low of 82.33 to a dollar on Friday.
Recently, RBI Governor Shaktikanta Das said that the central bank has zero tolerance for volatile and bumpy movement in the rupee and added that the RBI actions have helped in its smoother movement.
Asked whether high inflation will become the norm in India, Sanyal said India is facing fairly special circumstances where global inflation is clearly very high.
He pointed out that inflation in many developed countries is in double digits and in many emerging economies, it is 70 to 80 per cent.
“So in that context, I think 7 per cent (inflation) is a creditable performance.
“But of course, in the medium term, we would like to bring it back into the 2 to 6 per cent range and the Reserve Bank is taking measures, including tightening monetary policy to be able to make sure that inflation remains in a reasonable range,” he emphasised.
India’s retail inflation was at 7 per cent in August, above the RBI’s comfort level of 6 per cent, mainly due to higher food prices.
The Reserve Bank factors in retail inflation while deciding on its monetary policy and it has been mandated by the government to ensure that inflation remains at 4 per cent with a margin of 2 per cent on either side. PTI BKS ANU
0910 1434

https://economictimes.indiatimes.com/news/economy/indicators/india-will-stand-out-with-7-pc-growth-rate-in-fy23-amid-global-gloom-says-eac-pm-member-sanyal/articleshow/94740706.cms

My exclusive stories

September 7, 2022 at 12:52 pm | Posted in Uncategorized | Leave a comment

ZCZC
PRI ECO ESPL NAT
.NEW DELHI DCM46
BIZ-BANK PRIVATISATION-LD SUBBARAO
Former RBI governor suggests 10-year road map for privatisation of all public sector banks
(Eds: Adding quotes)
By Bijay Kumar Singh
New Delhi, Sep 7 (PTI) Former RBI governor D Subbarao has suggested that the government should come up with a 10-year road map for privatisation of all Public Sector Banks (PSBs) as it would provide much needed predictability to stakeholders.
Subbarao further said that the big bang approach to privatisation of state-owned banks is not desirable but at the same time the issue should not be put on the back burner.
“Ideally, we should have a road map, maybe over a 10 year timeframe, to privatise all PSBs.
“That will give much needed predictability to all stakeholders,” he told PTI.
Meanwhile, Subbarao said the government should also be thinking about corporatisation of public sector banks so that they come within the umbrella of uniform RBI regulation.
In the Union Budget for 2021-22, the government announced its intent to take up the privatisation of two PSBs in the year and approved a policy of strategic disinvestment of public sector enterprises.
The government think-tank NITI Aayog has already suggested two banks and one insurance company to the Core Group of Secretaries on Disinvestment for privatisation.
According to Subbarao, the impact on the Indian economy of privatisation of PSBs will be in two ways.
“The overall efficiency of the banking system will improve as public sector banks, freed from the obligation of driving social objectives, will pursue profit maximisation like their private counterparts,” he said, adding that the pursuit of social objectives like financial inclusion and priority sector lending might, to some extent, be compromised.
Even so, Subbarao said he believes the net cost benefit calculus of privatisation will be positive.
In 2020, the government merged 10 nationalised banks into four large lenders, thereby bringing down the number of PSBs to 12.
The former RBI governor observed that at India’s current stage of development, the country should be using other instruments to pursue social objectives rather than continuing to place the burden on bank depositors and borrowers.
A research paper published in the August 2022 issue of RBI Bulletin had said “the gradual approach to privatisation adopted by the government can ensure that a void is not created in fulfilling the social objective of financial inclusion.
Asked whether high inflation will become the norm in India and if the country’s inflation targeting regime faces its biggest test at the moment, Subbarao said he believes the RBI’s monetary policy action as well as possible base effect will help bring inflation down to 4 per cent over the next two years.
RBI has been mandated by the government to ensure that inflation remains at 4 per cent with a margin of 2 per cent on either side.
Noting that monetary policy action will involve raising interest rates and withdrawing liquidity which RBI has already started, Subbrao said there is a case for further tightening although he cannot speculate on how much.
“The trend inflation of 6 per cent suggests that the repo rate should be 7 per cent so that it is positive in real terms,” he said, adding that it is possible that RBI might not be so aggressive in the face of global slowdown.
While pointing out that it is important that the government deliver on the budgeted fiscal deficit of 6.4 per cent of GDP notwithstanding higher than budgeted expenditure commitments on food and fertilizer subsidies, Subbarao said any additional borrowing, apart from eroding fiscal credibility, will also put upward pressure on inflation.
According to official data, retail inflation softened to 6.71 per cent in July due to moderation in food prices but remained above the Reserve Bank’s comfort level of 6 per cent for the seventh consecutive month.
The Consumer Price Index (CPI) based retail inflation was at 7.01 per cent in June and 5.59 per cent in July 2021. It was above 7 per cent from April to June this fiscal. PTI BKS CS HVA
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BIZ-LD ECONOMY-MPC MEMBER
Escalation of geopolitical tensions biggest risk to India’s growth outlook: Jayanth Varma
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By Bijay Kumar Singh
New Delhi, Aug 24 (PTI) The biggest risk to India’s growth outlook is an escalation of geopolitical tensions, especially if these tensions spread to the Asian region, RBI Monetary Policy Committee (MPC) member Jayanth R Varma said on Wednesday.
Varma, in an interview to PTI, said that inflation and inflationary expectations appear to be moderating and high inflation will certainly not become the ‘norm’ in the country.
He is cautiously optimistic about the Indian economy as after the pandemic abated, consumption demand has begun to recover though the recovery is uneven across sectors and industries.
“Capacity utilization has been inching up, and is now approaching levels at which business will have to seriously consider capital expenditure for expansion,” Varma added.
He further noted that the MPC is determined to bring inflation down close to the target rate of 4 per cent as quickly as possible without imposing intolerable costs in terms of economic growth.
“I would like to emphasize that high inflation will certainly not become the norm in India,” he said.
The Reserve Bank in its latest MPC meeting in August had decided to increase the benchmark lending rate by 50 basis points to 5.40 per cent to quell inflation.
The central bank has been tasked by the government to ensure that retail inflation remains within the range of 2-6 per cent.
“Finally, inflation and inflationary expectations appear to be moderating (both in India and globally) and this would reduce one of the major headwinds for the Indian economy,” Varma noted.
Retail inflation based on Consumer Price Index (CPI) eased to 6.71 per cent in July but remained above RBI’s tolerance level for the seventh month in a row. The Reserve Bank had projected retail inflation to average 6.7 per cent in 2022-23.
Turning to the negative side, he observed that in the current global environment, exports might not be as buoyant as they were in the past and said while India is not an export-driven economy, an export slowdown would be a drag on growth, if it is sustained.
“The biggest risk to the growth outlook is that of an escalation of geopolitical tensions especially if these tensions spread to the Asian region,” he said.
Russia started its military offensive against Ukraine on February 24. Western nations, including the US, have imposed major economic and other sanctions on Russia following the aggression.
Noting that inflation has already peaked, Varma said Inflation would be above the target for several quarters, but there is reason to believe that the worst is over, unless the world is confronted by another unforeseen global shock.
On the other hand, he said any adverse shocks to economic growth (domestic or global) could cause a steeper decline in inflation than is currently expected.
He said in the last three years, India’s inflation targeting regime was confronted with two shocks in rapid succession — the pandemic (which was an unprecedented growth shock) and the Ukraine war (which has caused a global inflation shock).
“By helping maintain credibility of monetary policy, the inflation targeting regime proved its worth in confronting both these shocks,” Varma, currently a professor of Indian Institute of Management (Ahmedabad) said.
According to him, transitioning rapidly from a growth shock to an inflation shock was a severe and unexpected challenge. “It is true that inflation has stayed above the upper tolerance band for too long, and this would have to be addressed in the ensuing months.” he opined.
According to the International Monetary Fund, the Indian economy is forecast to expand at 7.4 per cent in 2022-23, making it one of the world’s fastest growing economies.
Replying to a question on weakening of the Indian rupee, the eminent economist said exchange rate movements are driven by multiple forces of which inflation is only one.
Varma pointed out that over the last several decades, Indian inflation has tended to be above global levels, and during this period India has witnessed periodic episodes of currency depreciation that serve to reverse the loss of competitiveness arising from the cumulative inflation differential.
“Viewed in this light, the recent weakening of the rupee is not a cause for alarm,” he said.
The US dollar, which has risen by over 8.3 per cent since March 31, 2022.
On average, the Indian rupee depreciated 1.9 per cent against the US dollar (m-o-m) in July, even as the US dollar index appreciated by 2.9 per cent. PTI BKS CS DRR
2408 1222

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BIZ-FREEBIES-MPC MEMBER
Freebies are never ‘free’; political parties must be required to inform voters about financial implications: RBI MPC Member Ashima Goyal
By Bijay Kumar Singh
New Delhi, Aug 21 (PTI) Freebies are never ‘free’ and when political parties offer such schemes, they must be required to make the financing and trade-offs clear to voters, RBI Monetary Policy Committee (MPC) Member Ashima Goyal said on Sunday, adding this would reduce the temptation towards “competitive populism”.
Goyal further said a cost is imposed somewhere when governments provide freebies, but this is worth incurring for public goods and services that build capacity.
“Freebies are never free… specially harmful are subsidies that distort prices,” she told PTI in an interview.
Noting that this hurts production and resource allocation and imposes large indirect costs, such as the water table falling in Punjab due to free electricity, Goyal said such freebies come at the cost of low quality health, education, air and water that hurt poor the most.
“When parties offer schemes they must be required to make the financing and such trade-offs clear to voters. This would reduce the temptation towards competitive populism,” the eminent economist argued.
Prime Minister Narendra Modi has in recent days hit out at the competitive populism of extending ‘rewaris’ (freebies) which are not just wastage of taxpayers’ money but also an economic disaster that could hamper India’s drive to become atmanirbhar (self-reliant).
His comments were seen directed at parties like the Aam Aadmi Party (AAP) which have in the run-up to assembly elections in states like Punjab and more recently Gujarat promised free electricity and water, among others.
Earlier this month, the Supreme Court had suggested setting up a specialised body to examine “irrational freebies” offered to voters during elections.
On India’s macroeconomic situation, Goyal, currently emeritus professor at the Indira Gandhi Institute of Development Research, said, “Indian growth is sustaining despite continuing global shocks and rate rises.”
While observing that India has done better than most expectations and in comparison to many countries under challenging conditions, she said among reasons for this are growing economic diversity that helps to absorb shocks.
“Large domestic demand can moderate a global slowdown; if industry suffers from lockdown, agriculture does well,” she said, adding that services compensate for less contact-based delivery with digitisation, distance work and exports.
According to Goyal, even if global growth slows, diversification from China, India’s digital advantage and government efforts to promote exports would support India’s outbound shipments.
Emphasising that a rise in the currently very small Indian share in world exports remains feasible, Goyal said diversity and reforms in the financial sector have improved its stability.
“Coordinated fiscal and monetary policy action to reduce inflation while maintaining adequate demand has worked well. Rising real policy rates have prevented over-heating and anchored inflation expectations, as they approach positive values,” she noted.
The Reserve Bank’s MPC at its meeting from August 3 to 5 had decided to increase the benchmark lending rate by 50 basis points to 5.40 per cent to quell inflation. This was the third consecutive increase since May.
Asked whether high inflation will become the norm in India and if the country’s inflation targeting regime faces its biggest test at the moment, Goyal said, “The big test is already past and looks like flexible inflation targeting (FIT) is winning.”
Pointing out that inflation peaked in April and has been falling since then, she said July was only the sixth month when inflation slightly exceeded the tolerance band but it has reversed and may fall below 6 per cent before October or slightly later.
“Inflation expectations have fallen. The attempt will be to further slowly guide them towards the target in a soft landing, even as a robust growth recovery takes hold,” Goyal said.
The retail inflation was at 7.01 per cent in June and eased to 6.71 per cent in July. RBI has been mandated by the government to ensure that inflation remains at 4 per cent with a margin of 2 per cent on either side.
Replying to a question on weakening of the Indian rupee, Goyal said the dollar has strengthened against all currencies because of the strong US recovery and rising interest rates.
“But Indian reserves and forex intervention has ensured the rupee depreciation was only about half of the USD rise and much less compared to other countries,” she said, adding the intervention is aimed at smoothing excess over- or under-shooting while letting the market determine exchange rates.
Goyal noted that some nominal depreciation is required in line with the country’s major export competitors and its excess inflation.
“India’s depreciation is about the same as China’s,” she said. PTI BKS MR ABM
ABM
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My interview of NITI Aayog member V K Saraswat

August 8, 2022 at 10:50 am | Posted in Uncategorized | Leave a comment

https://energy.economictimes.indiatimes.com/news/power/india-should-set-up-small-modular-reactors-to-meet-energy-demands-niti-member-v-k-saraswat/93417720

India should set up small modular reactors to meet energy demands: Niti member V K Saraswat
By Bijay Kumar Singh
New Delhi, Aug 7 (PTI) Niti Aayog member and scientist V K Saraswat on Sunday suggested that the government should focus on setting up small modular reactors as it would help meet the country’s energy needs and also in replacing aging thermal power plants.
Saraswat also said nuclear power plant projects which have been set up under the fleet mode production, should be accelerated, so that India is able to meet base load requirements at the earliest.
“We are suggesting that in future we should go for small modular reactors which will be able to meet this (energy) requirements in a distributed manner.
“And we are also thinking that it will be the best approach for replacing the aging thermal power plants,” he told PTI in an interview.
Small modular reactors (SMRs) are advanced nuclear reactors that have a power capacity of up to 300 MW(e) per unit, which is about one-third of the generating capacity of traditional nuclear power reactors.
Under the fleet mode, a nuclear power plant is expected to be built over a period of five years from the first pour of concrete.
According to Saraswat, the advantage of an advanced modular reactor is that it is factory fabricated and can be operated by any agency and there could also be a larger participation of the private sector in that.
Currently, India operates 22 reactors with a total capacity of 6,780 MW in operation.
Last year in December, Minister of State in the Department of Space and Department of Atomic Energy Jitendra Singh had said the share of nuclear power in the total electricity generation in the country was about 3.1 per cent in 2020-21.
“The net-zero targets are expected to be met through a combination of various clean energy sources, including nuclear power. In this context, the present nuclear power capacity of 6,780 MW is planned to be increased to 22,480 MW by 2031 on progressive completion of projects under construction and accorded sanction. More nuclear power reactors are planned in future,” Singh had said.
Replying to a question on India’s energy security, Saraswat, a former chief of the Defence Research and Development Organisation said,”Our energy security per se has improved drastically as we are not an energy starved nation any more.”
He asserted that today India is meeting all its energy demands domestically.
“As far as power generation is concerned, we are better off. We have solar power, which is almost the cheapest in the world…And the cost of setting up a solar plant has come down,” Saraswat noted.
Asked to respond to Telangana Chief Minister K Chandrashekar Rao’s allegation that the Centre is forcing states to import coal for thermal power stations, Sarasawat said these statements need scrutiny.
” Coal import is going on, in case of coastal power plants. It is cheaper for coastal power plants to import coal compared to transporting across states for example from Odisha to down south in Karnataka,” he argued.
Asserting that coal has been made available to all thermal power plants, Saraswat said, “Landlocked states which already have thermal power plants, are supplied coal even when loads have gone up.”
For example, he recalled that during this summer, the loads peaked up and there was hue and cry over coal availability for power plants.
“And by working with the Railways in tandem, we were able to provide coal (to power plants across states). So managing, what is called increased demand has been done in a very efficient manner,” Saraswat said.
Recently, Rao had alleged that the BJP-led NDA government is corrupt, and the government at the Centre would be replaced and there would be inquiry on the ‘misdeeds’ such as coal import pressure on states. PTI BKS CS ANU
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