Prime Minister interacted with India’s leading economists on January 8 in a meeting organised by NITI Aayog, on charting the economic agenda in the post COVID world. The attendees agreed that high-frequency indicators are showing signs of a strong economic recovery and that too earlier than expected.
The Top economists urged Prime Minister Narendra Modi to aggressively push privatisation of state-owned enterprises, avoid challenging international arbitrations and increase infrastructure investment, saying these were essential to build investor confidence. Participating in a virtual meeting with the Prime Minister, some economists suggested that the government could take a lenient view on fiscal deficit in the forthcoming Budget for 2021-22 due to the urgency to revive the pandemic-hit economy, sources said.
According to the sources, the participants urged the government to come up with policies to increase exports and build investors’ confidence as, despite multiple structural reforms across sectors, investments are still not flowing into India in a big way. ”There is a need to boost investor confidence. The government should avoid challenging everything (international arbitration awards). This is important as investors are still wary of investing in India despite several reform measures,” one of the sources present in the meeting said.
The speakers also stressed on the need to raise India’s tax-to-GDP ratio, which is declining since 2008, embark on import tariff rationalisation and undertake bank recapitalisation. Economists urge PM Modi to push privatisation, increase infra spending
Among others, the meeting was attended by Arvind Panagariya, K V Kamath, Rakesh Mohan, Shankar Acharya, Shekhar Shah, Arvind Virmani and Ashok Lahri. Finance Minister Nirmala Sitharaman, Minister of State (MoS) for Finance Anurag Thakur, MoS Planning Rao Inderjit Singh, Niti Aayog Vice Chairman Rajiv Kumar and Niti Aayog CEO Amitabh Kant too were present at the meeting.
The meeting assumes significance as it is taking place ahead of the Union Budget to be presented by Sitharaman in the Lok Sabha on February 1. Some of the suggestions are likely to be considered by the minister while preparing the budget proposals.
According to sources, several economists suggested that the government should focus on export promotion as it was essential to boost domestic manufacturing. The sectoral experts underlined the need for more steps to increase investor confidence.
India’s GDP is estimated to contract by a record 7.7 percent during 2020-21 fiscal as the COVID-19 pandemic severely hit the key manufacturing and services segments, as per data released by the National Statistical Office (NSO) on Thursday.
According to the Reserve Bank of India (RBI), India’s economy is projected to contract 7.5 percent in the current fiscal ending March 31, 2021, while the International Monetary Fund (IMF) and World Bank have estimated the contraction at 10.3 percent and 9.6 percent, respectively.
The economy contracted by a massive 23.9 percent in the first quarter and 7.5 percent in the second quarter of this fiscal on account of the COVID-19 pandemic. India’s economic growth stood at an estimated 4.2 percent in 2019-20.
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