India better placed to deal with global challenges: CEA

NEW DELHI: Chief economic adviser V Anantha Nageswaran said on Tuesday that India is better placed to deal with the global economic challenges than several other countries. He also asserted that the Reserve Bank of India’s (RBI’s) move to raise interest rates sharply may not be anti-growth.

“Interest rate increase may not necessarily be an anti-growth move, especially when real interest rates are still on the lower side,” the government’s chief economist told reporters after the GDP numbers were released. He said government spending, and a revival of private capital expenditure in the second half of the current financial year, are expected to help the Indian economy grow by 7-8%.

Pointing to inflation numbers around the world, he said prices were being driven by global factors and the situation in India was better than several advanced countries. He also said that a series of measures taken by the government over the last few weeks will help calm inflationary pressures.

Inflation has surged to the highest level since Narendra Modi took over as PM eight years ago, amid soaring oil and commodity prices and a global disruption in supply chains due to the war in Ukraine. Nageswaran, who took over at the end of January, said the economy has proved to be resilient with all major activities, barring a few contact-based services, surpassing their preCovid levels during the last financial year (2021-22).

He said the risk of stagflation — when an economy faces moderation in GDP growth along with high inflation — was low in India. “Compared to the experience of many developed and developing countries, India is somewhat better placed and, more importantly, both the central bank and the government are seized of the problem and are addressing them. I would at this stage say that stagflationary risks for India are quite low compared to the rest of the world. ”