Inflation, high oil prices temporary; economy opening up: Officials

Inflation driven by high crude oil prices is a temporary phenomenon and the economy is gradually opening with both public and private investments picking up, senior government officials said on Friday.

The tourism and travel sector, which has been the worst hit, is also recovering gradually with international travel with some of the countries opening up, they added.

"At this point of time, it (inflation) is a worrying factor but I don't think this phenomenon will stay for long," Ministry of External Affairs Secretary for Economic Relations, Dammu Ravi said at a virtual event of the Public Affairs Forum of India (PAFI).

 

He was replying to a query on concerns around inflation across the globe.

He further said the whole world is going through a transition after having faced the COVID-19 crisis for two years.

"It is just now that things are showing up. Around the world, you see a different kind of equation that things are expensive, in the sense that oil has gone up very high now. It is driving up the commodity prices elsewhere. That's a worrying factor.

"We need to have a balance. Inflation that many countries are worried about is a temporary phenomenon," Ravi said.

Fuel prices in India too have spurted to record highs, leading to a rise in food prices and other commodities.

Ravi said India is looking at having partnerships with a greater number of countries for growth.

"Domestic market is important but we also need to compete on a global scale. Our exports for almost the last 10 years have been stagnant at around USD 300 billion and in that context Prime Minister's target set for USD 400 billion is indeed extraordinary," Ravi said.

All the international missions are working very closely to reach this target by the end of the financial year, he added.

The economic relations secretary noted that there is a need to focus on micro, small and medium enterprises (MSMEs) as they are a major source of job creation and exports.

"We need to bring back the debate to MSME and their role in the economy. We have been talking about it but I don't think much has been done in that area, specially in terms of making them sustainable and strong in the economy as participants," Ravi said.

According to official estimates, there are about 6 crore MSME creating more than 10 crore jobs and accounting for 40 per cent of the country's exports.

"Policy focus should be to make MSME become stronger and there should be incentives to enable them to graduate to the next level.

"I think field formation levels at the customs, laboratory level -- all these need to have collective understanding of the whole of the government of India approach to tackle these problems for MSME to facilitate them. Big industry will always be able to find the way out but it is MSME who face hurdles," Ravi said.

He also said the culture of entrepreneurship should be encouraged in the country, which will boost the economy.

Tourism Secretary Arvind Singh said the first wave's impact led to millions of job losses, sizable drop in revenues and drastic reduction in inbound passengers, while domestic travel also took a hit.

"The second wave again hit the sector very badly. Post July, we are seeing revival in the domestic sector," he noted.

He said the health ministry has come out with guidelines where quarantine rules have been relaxed for those countries with whom India has an agreement or who recognise the country's vaccines.

"At least for travellers from such countries, travel will be seamless. I also expect international travel to pick up gradually as we are opening up," Singh said.

Information and Broadcasting Secretary Apurva Chandra, who has spent most of the last two years in the defence ministry, said local content has increased significantly in defence procurement and now a very large proportion of contracts has started going to Indian vendors, be it in public or private sector.

"There are still some limitations because some high value contracts, especially on the aircraft side...we do not have that kind of capability yet so they go to foreign vendors but almost 50 per cent of the total contract in value are going to Indian vendors," Chandra said.

He said ship building is now completely indigenous, and public sector unit HAL has been awarded a Rs 40,000 crore contract for making light combat aircraft.

"It will give huge impetus to the domestic sector because these are designed, developed and manufactured in India. We hold the patent for it," Chandra said.

He pointed out that the recent Rs 20,000-crore contract given to Tata-Airbus will bring aviation manufacturing to the country, with Airbus shifting its manufacturing line from Spain to India.

Talking about the broadcasting sector, he said the industry, except over-the-top (OTT) players, has been hit very badly but now is returning to the growth path.

Skill Development Secretary Rajesh Aggarwal said both public and private investment under various schemes are driving employment opportunities.

In the coming months, there will be a lot of developments to link skill development courses with education verticals in the form of credit transfers between the courses, among others, he emphasised.

"I hope in the next three-four months you are going to see a lot of traction in this area, lots of regulatory action in this area. Can a 12th pass ITI students get a BA degree etc. Lot of regulatory movement and funds movement are going to happen in this area. This will impact 16 to 21 years kind of age profile," Aggarwal said.