Chief economic adviser concerned about rural economy's contribution to growth but sees a silver lining

The global economy is in the throes of fiery inflation and at the same time fears a growth slowdown. In an interview with CNBC-TV18, V Anantha Nageswaran, the Chief Economic Adviser voiced his concern about the rural economy’s contribution to the growth and hoped that second half of the year things will turn around.

“There is a legitimate concern with respect to the rural economy’s ability to contribute to economic growth, but hopefully and although the first two weeks of monsoon have been somewhat disappointing, the deficit is catching up and the fact that prices have been rolling high. Food prices on one hand whilst it's a big inconvenience to consumers, it also offers better terms of trade to farmers,” he said.

As seen in the table above, apart from the latest reading for the month of May, rural inflation has stayed above the headline inflation in 2022. In December 2021, the reading was similar though it had not crossed the 6% mark — 5.36% rural vs 5.59% headline.

“It's my hope that once the monsoon is accepted as having delivered its normal quota of rainfall etc., then rural economy, in the second half, should be rather than a headwind but be a tailwind for economic growth,” Nageswaran added.

The chief economic adviser also echoed market the market sentiment that it is reasonable to expect the repo rate to rise to between 6 and 6.5 percent this year from the current 4.9 percent and predicted that the nominal GDP and revenue assumptions will be higher than the budget estimates.