'There's space to provide economic support'

NEW DELHI: There is monetary and fiscal space to provide more support to the economy, which has picked clear momentum, principal economic advisor Sanjeev Sanyal told ET. A carefully calibrated monetisation is part of every policy maker's toolkit, he said, cautiously pitching the idea to fund more stimulus measures.“We have to make sure that productive parts of the economy continues to be supported, demand needs to be supported and certain kinds of asset creation needs to be supported,” Sanyal said. “Now, some of it will come through borrowing; some of it, maybe in the medium term, we'll be able to monetise, privatise; and at some point carefully calibrated monetisation of the deficit will also be done.” However, this does not mean that India does what Joseph Stiglitz or some other Western economists advise – monetisation without a worry in the world, he said. “So we will do some monetisation, but it will be done in a very carefully calibrated way that it does not cause disruption in either our money supply growth, or to, you know, the inflation.” Sanyal said the government had made it adequately clear during the lockdown that emphasis was on providing a cushion and a safety net for the poorest sections and for the most vulnerable parts of the business system.“There was no point in pressing the accelerator when you had your foot on the brake. However, the foot is now off the brake, we will press the accelerator,” he said. “There is monetary space which the RBI has pointed out as well, and, there is fiscal space,” Sanyal said. He said the Reserve Bank of India had already provided some support and is ready to provide more if needed.India, the principal economic advisor said, is one of the few countries in the world where interest rates are still significantly positive. “So, we are in a position to lower it.” The recent spike in inflation was driven by food, he said. “My own view of inflation is that there is no demand-driven inflation in the system... I think from January onwards inflation will come off.” On the fiscal side, the government will provide whatever fiscal resources are needed in order to provide support to the economy, Sanyal said.“When we say infrastructure driven and support for the economy, we are consequently committing to spending it over a period of time as you cannot start and stop infrastructure projects,” he said.Both Prime Minister Narendra Modi and finance minister Nirmala Sitharaman have said the government will ramp up the effort, spearhead ready projects, or projects already in play will be provided whatever resources necessary to keep them on schedule or even speed them up.On the private sector side, the government is committed to removing whatever regulations are necessary in order to encourage investment, Sanyal said.“On the supply side, on Make in India you have seen a lot of effort being made,” he said. “Various schemes are being created to relocate supply chains to India…. We are now doing that on the services side… BPO/IES reforms announced on Thursday are in this context.” On recent uptick seen in some sectors, Sanyal said there was a clear momentum. While there may be some element of constrained demand from the lockdown period that has been released now, it does appear that many of the things clearly indicate new growth, he said, citing the example of upswing in demand for power.Purchase managers’ index (PMI) numbers also indicate there is new demand as it was based on orders, Sanyal said. “Wherever we opened up a sector, demand has come back quite strongly,” he said.Asked about the delay in payments to suppliers and expenditure rationalisation, Sanyal said the finance minister has made it very clear that payments should be made on time.However, he said, rationalisation of the government and administrative efficiency is an important part of the promise of minimum government maximum governance.

from Economic Times https://ift.tt/3kbc5Qa