Chief Economic Adviser V Anantha Nageswaran on Tuesday said the oil price outcome will demand on demand disruption caused due to high prices and said if global crude continues to remain above $110 per barrel, the government will have to rethink its strategy.
In an exclusive interview with CNBC-TV18, the CEA said the governement will have to pass on the cost to the consumer of the price of crude oil remains above $110 per barrel for a quarter or two.
It is possible the the government has not passed on the entire increase in oil prices to consumers. The government has used fiscal space via Pradhan Mantri Garib Kalyan Yojana (PMGKY) to provide targeted relief to consumers, Nageswaran said. He further said if crude prices stay at these levels for long, then sharing of burden between the government, oil companies and people will be warranted.
Nageswaran further said be is surprised at the hawkishness of the United States Federal Reserve -- some US Fed members see funds rate at 2.75 percent by the end of 2022. Last time, the US Fed had to stop its rate-hiking at 2.5 percent, Nageswaran said, adding that Fed action is likely to be front-loaded this time; because of its penchant to under-promise and over deliver, divestment has been pegged low.
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The Chief Economic Adviser said the government’s underlying commitment to privatisation is unwavering. "We need more private banks to be licensed -- bank licences are 'on-tap' and licences need to flow. Large NBFCs (Non-Banking Financial Corporations) should be encouraged to become banks," he said, adding, "What's happening in the fintech space will ensure more credit.
We need to ensure capital buffers and that NPA (non-performing asset) levels are maintained. The natural process of growth will lead to expansion of the financial sector."
Nageswaran further said the govenrment needs to work on getting timely labour force and employment data to be able to leverage that information to the maximum possible extend. "Some green shoots are visible in rural demand recovery. It is possible some migrant labour has returned to urban areas and remittances have improved."
Nageswaran said red flags for the Indian economy remain the persistence of crude prices and tightening by the Fed. As a country with a current accountt deficit, India will be impacted by these two factors, he said.
Also read: Petrol, diesel price hikes nearing global crude oil levels; excise relief discussed, no decision yet
First Published: Apr 12, 2022 3:38 PM IST
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