CEA Nageswaran says India better placed to face uncertainties
Chief Economic Adviser V Anantha Nageswaran said India is much better placed than some of the advanced countries to handle global headwinds stemming from the ongoing Russia-Ukraine war. Nageswaran was speaking to Chetan Krishnaswamy of Amazon India as part of the Amazon Sambhav Summit.
20 May 2022 | By Mansi Gupta
During a wide ranging fireside chat, Nageswaran touched upon a range of topics. He stated that India imports more than 80% of its crude from overseas. He said, "This raises our trade deficit, raises our current account deficit. But more importantly, it raises input costs for all businesses and for households." He pointed out that the consumption of petrol and diesel is essential and to that extent, "it reduces the disposable income for another spending."
Addressing the issue of food security and food inflation, Nageswaran said "India is far more comfortably placed than others." He pointed out that there are several countries where the availability of food is more important than even the price. He said, "Food availability and food security are going to emerge as a much bigger challenge for several low-income countries around the world."
Next, Nageswaran addressed concerns about the economy. He said, India paid a certain price last decade because we had banking system stresses. He felt this was compounded by stress in the non-banking financial sector towards 2018 as well as Indian corporates, trimming their balance sheets, getting their financial health in good shape, etc. The CEA pointed out that "India is entering this decade and the Russia-Ukraine conflict, with a much better financial system and a robust corporate financial health. So that gives us a lot of cushion."
He complimented the role that the Reserve Bank of India has played in terms of "ample foreign exchange reserves and with its recent monetary policy move". Nageswaran said this signalled RBI's determination to combat the inflationary pressures, which is a good thing. It's good for central bank credibility."
Speaking about disposable incomes, Nageswaran mentioned that public households "are going to be relatively cautious coming out of the Omicron or the Covid-mindset." He said, as a result, "corporates will be watching households increase their spending before they commit capital expenditure." He mentioned that "the government has taken it upon itself to drive the capital expenditure." He said, "The GoI has increased the Capex spending for 2022-23 to Rs 7.5 lakh crores, and then you add in the public enterprises spending their Capex, state governments being given a one lakh crore 50-year interest-free loan. So, net-net we are targeting something like less than 10 and a half to 11 lakh crores of Capex in the whole country. That gives us a certain growth cushion as well."
Next, he spoke about the government's "enthusiasm and commitment to concluding free trade agreements". India has concluded FTAs with the UAE and with Australia. He cautioned exporters about looking for "immediate benefits in terms of exports".
Nageswaran spoke at length about digital trade. He said, "As far digital trade is concerned, it's obvious that it makes it relatively easier to reach many far-flung parts of the world. Also for many businesses, even if they are not scale-based, the most important contribution that eCommerce enables is to take away 'scale' as an impediment." He added that "No matter how small you are, no matter how far or how remotely located you are, you're able to participate and be able to access a global market. He felt India has barely scratched the surface of digital trade.
He said, as India signs free trade agreements, digitally traded goods and eCommerce platforms will have a very big role to play in taking advantage of them and boosting our overall exports in the years ahead. This will benefit micro, small, and medium enterprises that can leverage their presence on digital platforms or eCommerce platforms.
Dr V Anantha Nageswaran spoke at the Amazon Sambhav Summit on 18 May 2022, a virtual event on the digital economy and job creation.
Digital platforms can make MSMEs grow
Dr V Anantha Nageswaran spoke about the importance of creating a digitally inclusive India. He said, India has half a billion internet users, and the numbers are growing. He said, "In a country that is a low-income country or aspiring to be a middle-income country in the next decade, we need to make sure that we provide access to all citizens to participate in technological advancement."
His message to the Amazon Smbhav Summit delegates was, "India is one of the lowest carriers in the world. And then we did that with the public digital goods and the payment gateways, which now even for one rupee, you can use your digital payments". He pointed out how this democratises eCommerce platforms and blends brick and mortar businesses and small businesses.
He said, "The developed world got to where it is today on the back of the micro, small and medium enterprises in their economies." However, he cautioned, "It is not enough to kind of romanticise MSMEs because when you romanticise them, you end up keeping them where they are. But if you believe in them, and their potential to transform the economy - then you have to provide them opportunities to grow out of their humble beginnings."
He added, "Platforms like ONDC provide opportunity. If the micro, small and medium enterprises can participate and gain from it, then they will be one of the most welcoming adopters and patrons of new technology. So, in multiple ways, I see this as revolutionising India's hinterland, revolutionising India's MSME sector, and eCommerce, and then eventually down the road, making a transformation in the lives of other developing nations."