States have higher role to play in India’s growth: CEA

For the Union government, the Chief Economic Adviser listed out securing India’s energy needs as one of the most important areas where it will have to make the biggest contribution in the wake of global developments. “At the Union government level, there are many things we can talk about but I will just keep to one important one – it will be about securing India’s energy needs and requirements in the light of global developments. That will be the biggest contribution that the Union government can make in the coming years because there is tremendous pressure on energy transition for justifiable reasons,” he said.

The Indian economy is estimated to grow 7 per cent this financial year as per the second advance estimates released by the National Statistical Office. For 2023-24, the Economic Survey released in January-end had pegged India’s growth rate at 6.5 per cent, while the Reserve Bank of India’s forecast is 6.4 per cent.

Nageswaran said that in the pre-pandemic years, India went through a “period of classic cycle of financial repair” and now the financial system has been repaired, banks have been recapitalised and there are indications of a pick up in real estate cycle and private sector capital formation, which will “restore growth to the extent of on an average in real terms of around 6.5 percent”. He, however, said he won’t talk about a growth number higher than that given the expectations of tepid exports. “I am not talking about numbers north of 6.5 percent for the simple reason…global export growth volumes may be somewhat tepid going forward considering the kind of uncertainties we face at the global level,” he said.

The CEA stressed upon the importance of economic growth for developing countries including India in order to finance their energy transition requirements. “Developing countries including India definitely need economic growth to finance their energy transition requirements. Without domestic savings, there is no question of adequacy of resources for financing energy transition, and there is going to be no domestic savings if there is no domestic economic growth. So in other words, if you have to address climate, you have to address economic growth first,” he said.

For energy transition and the financing of it, India will need to have the right policy mix, he said adding that without domestic growth, there would be no social stability nor public acceptance of some of the behavioral changes which would be required to succeed in energy transition. “…we have to understand that we have to get the energy transition and the financing of it right and that requires emphasis on economic growth for developing countries and that includes India also. More importantly, without domestic growth there is no social stability nor public acceptance of some of the behavioral changes we would like them to make to succeed in energy transition. Look at the reaction to the pension reforms in France, for example, or for that matter, in 2019, the Yellow Vest resistance. So we can’t tell people that carbon pricing will push your energy prices higher and it will all be a matter of a year or two before economic growth is restored back to the pre-energy transition years. That’s not going to happen. We have to be candid, we have to be honest and we have to understand that there will be growth sacrifices,” he said.