Economic Survey estimates conservative, says CEA V Anantha Nageswaran

In his first public appearance since being appointed the chief economic advisor, V Anantha Nageswaran said on Monday that the financial year 2022-23 (FY23) growth projections in the Economic Survey of 2021-22 are conservative compared to other agencies.

Nageswaran said the Survey’s assumption that crude oil prices will average at $70-75 a barrel through the year is realistic.

Nageswaran was announced as CEA on Friday as his predecessor Krishnamurthy Subramanian returned to academia in December. The Survey was, thus, drafted by Principal Economic Advisor Sanjeev Sanyal.

“The projection that the Economic Survey has made is on the conservative side, compared to the projections that other agencies have made. The base effect of 2020-21 is still there. We know there are issues to be tackled and growth will be one of the instruments through which we tackle those challenges,” Nageswaran said at the media briefing.

The Survey projects India’s real gross domestic product (GDP) to grow by 8-8.5 percent in FY23. This is higher than the Reserve Bank of India’s last forecast of 7.3 per cent, though it is lower than the International Monetary Fund’s recent projection of 9 per cent.

However, the projection is based on assumptions like a normal monsoon, that there will not be any further debilitating pandemic-related economic disruption, the withdrawal of global liquidity by major central banks will be broadly orderly, crude oil prices will be in the range of $70-75 a barrel, and the global supply chain disruptions will steadily ease.

On Monday, Brent Crude was trading at above $91 per barrel and WTI Crude hovered around $88 per barrel.

“The $70-75 assumption is an average price range. We are aware that it is currently trading at around $90. By the time we get into the next financial year, thanks to the monetary policies and liquidity tightening by various central banks and potential for growth slowdown in the developed world, will moderate demand for oil. So the assumption in the survey is a realistic one,” Nageswaran said.

Sanyal, who was also at the briefing, said that there is a need to be concerned about “imported inflation”, especially arising from an increase in global energy prices and supply chain issues. He was, however, confident that domestic inflation factors were well under control.

Nageswaran said the Narendra Modi government has pursued a four-pronged strategy to revive the economy of short-term support to the economy, with firm eye on medium-term fiscal stability, making use of the opportunity that the pandemic provided to undertake structural and supply-side reforms, and paying attention to process reforms as well.

On the need to boost job creation, Nageswaran said it will take time to regain confidence because the slowdown in consumption spending is not only a function of the lack of income growth, but also because of the uncertainty caused by the pandemic and health impact.

“Once the pandemic cloud is lifted, and many of the contact services come back to their pre-pandemic level, it will create a virtuous cycle of job creation and income growth assuming there is no other major Covid wave,” Nageswaran said. He added that the construction sector is beginning to revive and that’s one of the highest employers in the country.