India is on the verge of a major economic recovery, and fears of stagflation are "overblown," according to Niti Aayog Vice Chairman Rajiv Kumar, as a strong economic foundation is being laid with the government's reforms over the last seven years.
Despite the economic uncertainty caused by the Russia-Ukraine conflict, which is also affecting global supply chains, Kumar stated that India will continue to be the world's fastest-growing economy.
"Given all of the reforms we've done in the last seven years, and given that we're hopefully nearing the end of the pandemic, and the 7.8% growth rate we'll get this year (2022-23), a very strong foundation is now being laid for further rapid economic growth in the coming years," Kumar told in an interview.
According to recent government data, Asia's third-largest economy is expected to grow 8.9% in 2021-22. The Reserve Bank of India (RBI) has forecasted a 7.8% economic growth rate for 2022-23.
"I believe India is on the verge of a major economic recovery and growth," Kumar said, acknowledging that India's GDP growth projections could be revised due to the Russia-Ukraine conflict.
"However, India will continue to be the world's fastest-growing economy, and all other economic parameters are actually quite within the range," he said.
On February 24, Russia launched a military offensive against Ukraine. Following the offensive, Western countries, including the United States, imposed major economic and other sanctions on Russia.
The Niti Aayog Vice-Chairman said that the RBI is keeping a close eye on rising inflation as part of its mandate. "I am confident that the RBI has a firm grip on it (inflation) and will take appropriate action if and when necessary," he said.
In February, retail inflation reached an eight-month high of 6.07 percent, remaining above the Reserve Bank of India's comfort level for the second month in a row, while wholesale price-based inflation soared to 13.11 percent as crude oil and non-food item prices rose.
When deciding on its bi-monthly monetary policy, the RBI keeps a close eye on CPI inflation. The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has been given the mandate to keep annual inflation at 4% until March 31, 2026, with a 6% upper limit and a 2% lower limit.
Concerns about the risk of stagflation were addressed by Kumar, who stated that the Indian economy is expected to grow 7.8% this fiscal year, which is nowhere near the definition of stagflation.
"I believe this has been overhyped," he explained, "because when we talk about stagflation, we're talking about growth rates that are significantly lower than your rate of growth or potential output, which is not the case at all at this time."
Stagflation is defined as a situation in which inflation and unemployment are both high, and demand in the economy is also stagnant.
Kumar said that the government met its target of raising Rs 88,000 crore from asset monetization in the fiscal year 2021-22, which ended on March 31 "I've heard that this (target) will be met, or that if it isn't, we'll be very close. A number of things are in the works, and a number of ministries have already taken steps. So, I believe we will be on track."
Finance Minister Nirmala Sitharaman announced last year that a Rs 6 lakh crore National Monetisation Pipeline (NMP) would be launched over a four-year period to unlock value in infrastructure assets ranging from power to roads and railways. The report on NMP was prepared by Niti Aayog in consultation with infrastructure line ministries.
In response to the high price of gasoline and diesel, Kumar stated that, due to the global situation, fuel prices are rising all over the world. "The government has taken steps in the past to reduce the tax burden. And I believe it is now time for the states to step forward if they believe this is necessary," he stated.
In any case, Kumar stated that the government closely monitors all commodity prices, including fuel prices, and will take appropriate action if necessary. Petrol and diesel prices are rising, and they differ from state to state depending on the level of local taxation.
