Global Economy

Economy improving fast, growth to turn positive in Q3, Q4 of FY21: Ashima Goyal


NEW DELHI: India’s macroeconomic situation is
improving
fast and the country’s GDP
growth will
turn
positive
in the third and fourth quarters
of the current financial year, eminent economist Ashima Goyal said on Sunday.

Goyal
in an interview
to PTI said the management
of the COVID-19 pandemic and gradual unlocks announced by the government have helped
in avoiding multiple COVID-19 peaks.

The
growth estimates by different agencies are being continuously revised, she said.

“We are seeing the consensus negative forecasts shrinking below double digits now. Since unlock 4
in September that prevents states from restricting inter-state movements we are seeing supply chain disruptions easing and rapid pick-up
in activity.
Growth will
turn
positive
in
Q3 and
Q4.”

Goyal, who has been appointed as member
of the Monetary Policy Committee (MPC)
of the Reserve Bank
of India (RBI), said there is progress on many reforms and that will make higher long-run
growth sustainable.

“India’s diversity and resilience as well as the benefits
of surplus liquidity becoming available after a period
of severe liquidity shortage are contributing
to the turnaround,” she said while stressing that she was speaking
to PTI
in her personal capacity.

Replying
to a question on high retail inflation, Goyal noted that it is due
to transient supply-side factors such as unseasonal rains and supply-chain disruptions that are unlikely
to persist.

“Moreover, there are long-term changes that are likely
to reduce inflation,” she said.

Stating that while the repo rate as well as communication on targets and inflation paths anchors inflation expectations, she said liquidity and counter-cyclical macroprudential regulations can be used
to stimulate
growth.

“The RBI has implemented a number
of excellent measures that are also reversed
in time, without adverse effects-such as the moratorium,” Goyal, also a professor
of economics
of Indira Gandhi Institute
of Development Research (IGIDR), said.

She pointed out that the government is providing a considerable net demand stimulus because it is spending more although revenue has fallen.

“The budgeted fiscal deficit has already exceeded the budget estimate and the combined Centre plus states fiscal deficit is expected
to reach 12 per cent this year,” she said.

Replying
to a question on monetisation
of the deficit by the RBI, Goyal said true monetization is only if the RBI has
to automatically finance a deficit by making a transfer
to the government without any rise
in government debt.

“Then the money supply can rise arbitrarily raising risks,” she said adding this is not required because excess savings and limited OMOs will be able
to absorb the borrowing required by a relatively conservative government at low interest rates.

The RBI’s monetisation
of the fiscal deficit broadly means the central bank printing currency for the government
to take care
of any emergency spending and
to bridge its fiscal deficit. This action is resorted
to under emergency situations.

“Preserving RBI’s independence is important for long-run stability,” Goyal emphasised.

The RBI will unveil its next monetary policy
in December.

Moody’s Investors Service on Thursday upped India’s
growth forecast
to (-) 10.6 per cent for the current fiscal, from its earlier estimate
of (-) 11.5 per cent saying the latest stimulus prioritises manufacturing and job creation, and shifts focus
to long-term
growth.

Other global agencies Fitch Ratings and S&P have projected India’s economic contraction at 10.5 per cent and 9 per cent respectively.

Last month the World Bank said India’s
economy is likely
to grow (-) 9.6 per cent this fiscal, while IMF projected it at (-) 10.3 per cent
in 2020.





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