 "Dr Arvind Subramanian")
The Indian economy is well-cushioned to cope up with the challenges of US Federal Reserve interest rate hike and rising global crude oil prices, said Dr Arvind Subramanian, the chief economic advisor (CEA), at the Assocham Interactive session in New Delhi yesterday.
On the hike in US interest rates, the CEA in the Finance Ministry, said, “This was anticipated and expected. My own view is that on this the Indian economy is very well cushioned to absorb the impact of this. The RBI policy also took account of this in a very sensible way. There may be some short term things. This is not something we need to worry about.”
With regard to the outflows from the emerging markets, he said after the US elections there were already big fund flows from the emerging markets. “But given that India is in bright spot, the impact on us would be much smaller,” stated Dr Subramanian.
As for the rising crude oil prices, he said, “There would be some ups and down. If it persists there would be some implications but I don’t think oil prices are going to surge to a level which is difficult to handle for India.”
Listing the global challenges to be dealt with by the Indian economy, Dr Subramanian said while the strengthening of US dollar would be of less concern, the main headwind can be felt in the form of weakening of Chinese currency and those of other competing economies.
He stated, “It is not only the Chinese currency but also from Vietnam, Philippines and Bangladesh which would become more competitive. This could affect India’s competiveness in the export markets. If the Indian economy has to grow by 8 percent, then exports must expand by 15 percent.”
But key factor to watch, in the unfolding global scenario, would be whether the developed countries would be able to ‘handle’ more exports especially that of services from developing countries like India.
Asserting that the Indian economy is very stable at macro level, Dr Arvind Subramanian said, one of the challenges for the Indian economy in the short term is to manage the demonetisation fall-out.
