The writer is the chief economic advisor with the State Bank of India.
Soumya Kanti Ghosh, V Anantha Nageswaran write: It is sensible to wait for better data, which should become available in 2023, if not sooner
Soumya Kanti Ghosh, Sachchidanand Shukla write: While the government went all out last year to shield the rural economy and households by way of free food, free gas, front-loading PM-Kisan payments, increasing MGNREGA allocation, moratoriums etc, it seems to have changed tack in the current fiscal.
It must plan for vaccinating children, step up support to households, MSMEs, take steps to strengthen the health infrastructure.
It will help in recovering value from stressed assets and allow banks to increase lending.
Fortunately, the RBI and government have worked in perfect harmony during the pandemic.
The Union budget should focus on enhancing credit flows to the small and marginal farmers, increase investment in health and education.
The third and fourth quarter numbers are likely to spring a positive surprise, though conditional on the absence of another wave of infections.
Wearing masks is a perfect example of a public good, as there is always a proviso that the person not wearing a mask could benefit and hence, again, both defecting and not wearing masks could be an eventuality. In this case, we, however, need a harsh punishment for those not wearing masks.
An essential prerequisite in the current circumstances is effective communication by both the RBI and the government, with both speaking in unison.
In light of the announcement by the government on launching a scheme under PMJAY for the migrant labour/urban poor to provide ease of living at an affordable rent, optimal utilisation of these funds should be considered over the medium term.
Volatility of oil prices and structural changes in the economy make the forecasting of inflation and GDP a difficult job indeed. However, we should supplement our existing measurement practices with “big data” to make our statistical system robust.
The primary purpose of the budget is to lay out a receipt-expenditure statement and thereby the fiscal deficit estimates. This year is, perhaps, different as the slowdown has derailed the fiscal arithmetic.
Rather than opting for measures like farm loan waivers, which lead to problems of moral hazard that impact credit culture, measures should be undertaken to improve agricultural productivity. Alternatively, can we not enact a law to preserve policy continuity?
The recent empirical work on links between corporate bond markets and the bankruptcy system predicts that safe firms will issue bonds but higher risk firms, for whom insolvency is more likely, issue bonds as long as bankruptcy is efficient.
Indian negotiators have taken steps to ensure that domestic manufacturing is effectively protected from unfair competition.
Given a large jump in household leverage, monetary policy is unlikely to retain the effectiveness through large rate cuts in the current scenario. Only a counter cyclical fiscal response might address the core of the current problem.
The slowdown in demand is a fact, but the consensus that banks are not extending enough credit to help us navigate through the current slowdown is misplaced. This is a false narrative as Economics 101 suggests a bi-directional causality between economic growth and credit off-take.
The figures on the expenditure side of GDP do not foretell a promising picture. The decline in private final consumption expenditure is a matter of concern, though an increase in government final consumption expenditure has been able to offset it.
Around 70 per cent of farm land is being cultivated by tenant farmers who have no access to bank loans. So the move to grant them access to bank credit will significantly reduce rural debt. The idea of ‘Operation Green’ is also a welcome step
Policy should focus on recapitalising banks, giving incentives to sectors like telecom and housing, and alleviating the disruption caused by demonetisation and GST
For FY18, the Government Borrowing is budgeted at Rs 6.05 lakh crore and a net borrowing requirement is pegged at Rs 3.48 lakh crore taking into account repayments of Rs 2.56 lakh crore.
State Bank of India data suggests that states that have traditionally lagged behind in terms of economic growth are seeing more traction in women entrepreneurship through the Mudra route.
And many more for any monetary policy action to be supplemented with reforms to reverse the negative perceptions.
The huge expenditure on the food bill,with the attendant leakages,could well make fiscal recovery impossible
There is now increasing apprehension that,for the 12th time in succession,RBI will resort to monetary tightening in September.