After oil, 'economic acceleration’ meetings to focus on power, steel and exports
, ET Bureau|
Updated: Oct 12, 2017, 01.42 AM IST
NEW DELHI: The government’s current economic strategy is centred around high-powered "economic acceleration" meetings that focus on specific sectors, senior officials familiar with the thinking of political leadership told ET.
One meeting, on the oil sector and attended by ministers, oil industry CEOs and officials, has already happened on Monday. Power, steel and exports are the focus of next three "economic acceleration" meetings. On power, the special focus will be on trying to find solutions for firms with high debt and/or poor income streams due to problems in selling it.
Senior officials, who did not want to be identified, said the logic behind these meetings is broadly informed by three "realities".
First, an economic stimulus or fiscal relaxation is unlikely. One official said there has been "several rounds of discussions" on the pros and cons of a short-term economic stimulus and the understanding is that costs outweigh benefits.
Officials also said headline growth numbers do not reflect benefits reaching lower-income Indians from the government’s spending on roads, electrification and social welfare schemes. "For citizens benefitting from these expenditures a quarterly drop in GDP growth makes hardly any difference".
Second, officials said, the Centre’s "massive study of economic numbers that affect ordinary people" shows that some key numbers are in comfort zone. They include inflation, which officials said, was moderate despite the ongoing festival season. Additional government expenditure can also be inflationary, officials said. On improved opportunities for ordinary citizens, officials said it’s "little appreciated" that the massive "regularisation" of black money after demonetisation has lowered costs for citizens.
Mentioning the real estate sector, officials said "careful studies" have shown house rents have dampened across all markets and that this is a major economic benefit. They also said houses have become more affordable and demands of black payment have "vanished", again benefitting ordinary citizens.
Therefore, while the government is "looking at the economic situation carefully", it sees no reason to "press panic buttons".
Third, officials said government works on the basis that RBI will autonomously decide on interest rates and that the government’s economic policy has to work around the central bank’s stance. Officials said RBI’s strong focus on maintaining moderate inflation means the government will need to find micro solutions for energising investment, hence the "economic acceleration" meetings.
The government has come under criticism for the economy’s performance, including from senior BJP leaders like Yashwant Sinha. The Prime Minister had made a rare and lengthy intervention in the debate last week, in a speech peppered with economic data. The government’s economic managers have argued that some numbers point to the growth rate picking up in the coming quarters and that some amount of slowdown was expected after demonetisation and GST.
One meeting, on the oil sector and attended by ministers, oil industry CEOs and officials, has already happened on Monday. Power, steel and exports are the focus of next three "economic acceleration" meetings. On power, the special focus will be on trying to find solutions for firms with high debt and/or poor income streams due to problems in selling it.
Senior officials, who did not want to be identified, said the logic behind these meetings is broadly informed by three "realities".
First, an economic stimulus or fiscal relaxation is unlikely. One official said there has been "several rounds of discussions" on the pros and cons of a short-term economic stimulus and the understanding is that costs outweigh benefits.
Officials also said headline growth numbers do not reflect benefits reaching lower-income Indians from the government’s spending on roads, electrification and social welfare schemes. "For citizens benefitting from these expenditures a quarterly drop in GDP growth makes hardly any difference".
Second, officials said, the Centre’s "massive study of economic numbers that affect ordinary people" shows that some key numbers are in comfort zone. They include inflation, which officials said, was moderate despite the ongoing festival season. Additional government expenditure can also be inflationary, officials said. On improved opportunities for ordinary citizens, officials said it’s "little appreciated" that the massive "regularisation" of black money after demonetisation has lowered costs for citizens.
Mentioning the real estate sector, officials said "careful studies" have shown house rents have dampened across all markets and that this is a major economic benefit. They also said houses have become more affordable and demands of black payment have "vanished", again benefitting ordinary citizens.
Therefore, while the government is "looking at the economic situation carefully", it sees no reason to "press panic buttons".
Third, officials said government works on the basis that RBI will autonomously decide on interest rates and that the government’s economic policy has to work around the central bank’s stance. Officials said RBI’s strong focus on maintaining moderate inflation means the government will need to find micro solutions for energising investment, hence the "economic acceleration" meetings.
The government has come under criticism for the economy’s performance, including from senior BJP leaders like Yashwant Sinha. The Prime Minister had made a rare and lengthy intervention in the debate last week, in a speech peppered with economic data. The government’s economic managers have argued that some numbers point to the growth rate picking up in the coming quarters and that some amount of slowdown was expected after demonetisation and GST.
