Economy will improve after a critical mass is vaccinated: Expert
India's economy will do well once vaccination reaches a critical mass as pent-up demand, global recovery and easy financial conditions will boost activities, RBI's Monetary Policy Committee member Ashima Goyal said on Tuesday. "As India battles the second COVID-19 wave, the damage due to lockdown is much less and is unlikely to extend beyond the first quarter of the current fiscal year," she said.
India may register GDP growth of 9.8 percent: S&P Global
The eminent economist said the current localized reversal of unlocks has successfully bent the curve. "It is less disruptive of supply chains since it is adapted to local conditions and need not go all the way to a full lockdown," Goyal said. Recently, S&P Global Ratings slashed India's GDP growth forecast for the current financial year to 9.8 percent.
Fitch predicts a 9.5 percent growth in GDP
S&P Global said that the second COVID-19 wave may derail a budding recovery in the economy and credit conditions leading to a decline in GDP growth. According to Fitch, India's real GDP is expected to grow 9.5 percent between April 2021 to March 2022.
'India's post-COVID-19 fiscal expansion has been relatively modest'
Asked how the government's fiscal expansionism will play out with the rating agencies, Goyal said by the standards of advanced economies, India's post-COVID-19 fiscal expansion has been relatively modest. Noting that a restrained temporary expansion will be acceptable to rating agencies since it will contribute to recovery, she said it will be possible to reverse it in the medium term.
'India's goal of becoming $5 trillion economy will take time'
On the government's ambitious target to make India a $5 trillion economy by 2024-25, Goyal said after such an extended and unforeseen pandemic, it will take longer. Asked why the Indian economy failed to move at a higher growth trajectory in the last seven years, she said India has unfortunately suffered from over-reaction and pro-cyclicality in macroeconomic policies, which affected the financial sector.
Government should focus on increasing credit flows: Goyal
On the government's decision to privatize two PSU banks, Goyal noted that while some PSU banks have to become more efficient and energetic, at present it is better to focus on increasing credit flows. "India has had the lowest rates of private credit growth in the 2010s. Moreover, diversity in ownership and strategies makes for more stability in the financial sector," she added.