The European crisis and some missteps on the part of the Government have led to the current economic crisis in the country, said Dr. Kaushik Basu, Chief Economic Advisor, Government of India. The policy slowdown and fiscal imbalances need to be corrected, Dr Basu said, at the Export-Import Bank of India commemorative lecture.
Dr Basu warned that the impact of a meltdown arising from the current European crisis will be severe and India is not insulated from it. “It will hit us hard on the face,” he said. He also cautioned that fiscal stimulus might not have the desired effect this time as the ability of the economy to react to stimulus has already fizzled out. Dr Basu said the need of the hour is to rev up growth. In his personal opinion, the Reserve Bank of India should cut policy rates to support growth. India should take advantage of the depreciating rupee to boost exports, Dr Basu said. “We should take advantage of the depreciating rupee. Much of this depreciation is because of external factors and many other world currencies have also depreciated.”
On policy reforms front, he said Foreign Direct Investment in multi-brand retail can help swing the investment mood favourably. He said consumers and farmers will benefit almost immediately from such a move.