Fine fettle of corporate India’s balance sheet and prudence of the Union Budget has put India in a better position to tackle various economic challenges created by geopolitical situation, Chief Economic Advisor Anantha Nageswaran said here on Thursday.
He said scenarios including high oil and commodity prices, Ukraine-Russia war can be quite challenging but do not create a big headwind for India’s growth. It is unnecessary to imagine dark scenarios, he added.
He was speaking at a panel discussion titled ‘India at 75 - The Road Ahead’, as part of United Way Chennai’s Markets and Economy 2022, an annual discussion on the economic and investment outlook for India.
The event was organised by the Chennai chapter of United Way, a global network of locally governed non-profit organisations.
On growth assessment
“Many people are saying they have downgraded growth assessment of India for FY22-23 but you must remember that they are starting from a high level of 9-9.5 per cent and bringing it down to 8 per cent and so on but the Union Budget itself made an assumption of barely 6.5-7 per cent for real GDP growth and 4-4.5% of inflation,” Nageswaran said.
He added that revenue growth projection for FY22-23 was also built on a depressed base of FY21-22.
“The conservative set of assumptions give us a better footing to handle many different scenarios of oil price except for an exceedingly high price of crude oil,” the Chief Economic Advisor said.
He said the reason why external uncertainties will turn out more manageable for India than others is because the country has already paid its growth dues in the last decade.
“The financial sector and non-financial corporate sector has set of balance sheet problems and even before the Covid-19 pandemic stuck, these balance sheet issues had largely been addressed,” Nageswaran, said, adding, “But for the pandemic, we could have already seen the green-shoots of borrowing for capital expenditure and capital formation in the industry.”
“So, I feel that once the cloud of the pandemic is lifted from people’s minds, I think consumption and demand will slowly pick up and the corporate sector will start to invest, leading to employment generation,” Nageswaran, said.
He also said that until that pick up happens, the government emphasis on the capital expenditure will provide the support for the economy before the private sector is confident about demand visibility and starts investing.