The underlying inflationary pressure is not strong despite the weather related spikes in vegetable prices, member of the economic advisory council to the Prime Minister, Sanjeev Sanyal said Tuesday, two days before the Reserve Bank of India’s August monetary policy announcement.
The six-member monetary policy committee of the central bank began its meeting Tuesday. The committee members are expected to focus this time more on tomato and green chilli prices, which surged last month, leading to a rise in consumer price index (CPI) for the first time in five months.
However, despite the CPI being at 4.81% in June against 4.31% in May, the market expects the central bank to keep the policy repo rate unchanged at 6.5%.
On GDP, Sanyal said that India should be happy with 6.5-7% growth even as the world’s fifth largest economy has the capacity to push for higher growth.
“There is no need to press the accelerator at this moment. We can do that when there is a clear highway. The road is full of potholes,” the economist said, at a Bharat Chamber of Commerce event, suggesting that the country should consolidate its fundamentals at this juncture.
He said that there’s no point sacrificing macroeconomic stability for a few percentage points of higher growth when the world economy is suffering from stress and the lack of global demand would slow India’s export growth.
India’s macroeconomic stability can be gauged by the moderating current account deficit, which fell to 0.2% of GDP in the fourth quarter of FY23 from 2% of GDP in the preceding quarter, and robust foreign exchange reserves at $600 billion.
Sanyal said that while investments in infrastructure are bearing fruits and the banking sector reforms along with tax reforms through the introduction of the Goods and Service Tax put the economy on a strong pitch.
He said administrative and judiciary reforms ought to be the next major agenda for the government as the current framework of administration, which carries the British legacy, is aimed at controlling things, instead of facilitating them.
The reform may be on the bucket list for the next government, he said.
The country would go for parliamentary elections in 2024 when Prime Minister Narendra Modi would seek a third term for the Bharatiya Janata Party (BJP) in a row.
“Whenever the reforms take place, there would be disruptions. So, public support will be needed for these,” Sanyal said
