Economist upbeat on India's GDP growth

New Delhi: Eminent economist Ashima Goyal on Sunday said India is likely to have one of the highest rates of growth in the world as there are gradual moves towards normalisation, even as stimulus and support for vulnerable sectors continue.

Goyal further said sticking to the announced consolidation path by the government in the upcoming budget will give a good signal of control and predictability.

"India has come out of a very difficult time with good macroeconomic parameters. It is likely to have one of the highest rates of growth in the world, while inflation remains within the tolerance band," she said.

Goyal, who is also a member of the Monetary Policy Committee (MPC) of the RBI, in an interview to PTI said monetary-fiscal coordination has worked well and stimulus has been adequate but not excessive.

"There are gradual moves towards normalisation, even as some stimulus and support for vulnerable sectors continues," she said, adding that the financial sector is healthy. The RBI has lowered the growth projection for the current financial year to 9.5 per cent, while the IMF has projected a growth of 9.5 per cent in 2021 and 8.5 per cent in the next year.

On threat from the new Covid-19 variant to the economy, Goyal said the recovery should be durable, with productivity enhancing reforms and the appropriate policy support.

"The country is now much better prepared to face another wave, if it happens. In the second wave, disruption to the economy was lower because there is less supply chain disruption with localised lockdowns," she noted. The new potentially more contagious B.1.1.529 variant (Omicron) was first reported to the World Health Organisation (WHO) from South Africa on November 24.

Asked about going with fiscal consolidation or continuing with stimulus in the coming budget, the eminent economist said "sticking to the announced consolidation path will give a good signal of control and predictability". "Reforms such as more transparency should continue," she said, adding that this improves the credibility and accuracy of the budget figures. According to Goyal, revenue buoyancy gives the space to finance essential expenditure consistent with medium-term consolidation on the announced path, which already builds in some stimulus.

She noted the improvement in the quality of expenditure adds to the stimulus as does using the financial sector through warranties that do not add to current borrowing requirements. Goyal pointed out that improving the quality of expenditure implies a shift towards high multiplier and high job creation items such as investment, human capacity creation, supporting vulnerable sections and the greening of the economy.

On high inflation, Goyal said high WPI reflects high import prices, especially commodity prices, which may not persist beyond the winter.