India prepared to deal with global macroeconomic challenges: CEA

Asserts country's fundamentals are strong, govt and RBI will meet challenges with 'flexible and adroit' policymaking

Chief Economic Advisor (CEA) V Anantha Nageswaran on Wedn­esday said the government was prepared to deal with the current global macroeconomic challenges through ‘flexible and adroit’ policymaking.

Speaking at an event organised by the finance ministry and Securities and Exchange Board of India, the CEA said while there were many near-term challenges, India’s medium-term fundamentals were strong.

“While we are focusing on the near-term concerns and challenges, we need to understand that the medium-term fundamentals of the Indian economy remain solid, and we are much better placed than anywhere in the world to face the challenges that we are currently encountering,” Nageswaran said.

The CEA said there were considerable amount of challenges for the Indian economy from global macro, monetary policy, and political developments. 

“This year, we will be facing the challenges of managing a sustainably high growth rate, moderate inflation, keeping the fiscal deficit under balance, and also ensuring that the external value of the rupee remains stable,” he said.

“Naturally there is no pre-programmed road map or a menu of options that would help us face these challenges. It has to be adroit and flexible policymaking,” Nageswaran said.

On Wednesday, the six-member Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) unanimously voted to increase the benchmark policy rate by 50 basis points, thereby taking the repo rate to 4.90 per cent.

While the real GDP growth forecast for FY23 has been retained at 7.2 per cent, the inflation projection for the year has been increased to 6.7 per cent.  The MPC noted that inflation is likely to remain above the upper tolerance band of 6 per cent through the first three quarters of FY23.

“I also implore you to look beyond current concerns about inflation…Some of these structural reforms ... such as goods and services tax, Insolvency and Bankruptcy Code (IBC), etc. might have been temporarily overshadowed by external events such as the pandemic and now the geopolitical conflict. However, once these clouds recede they will begin to manifest and enhance India's growth,” Nageswaran said.

India's economy grew 8.7 per cent in last fiscal year (2021-22) as against 6.6 per cent contraction in previous year.