Perspective: India’s GDP Growth in FY23 | 07 January, 2023

Summary

The Indian economy is projected to grow at 7% in the 2022-23 fiscal year, down from 8.7% due to the poor performance of mining and manufacturing sectors. Despite the lower growth, it exceeds the RBI's 6.8% forecast. Experts discuss the impact of global headwinds, the need for structural reforms, and the challenges of boosting business confidence and private investment. They also highlight the importance of addressing rural consumption and the potential for inflation to affect the common man.

Takeaways

• 📉 The Indian economy is estimated to grow at 7% in the 2022-23 fiscal year, a decrease from the previous year's 8.7% growth rate, mainly due to poor performance in the mining and manufacturing sectors.
• 🔍 The manufacturing sector is expected to slow down to 1.6% growth from 9.9% in the previous fiscal year, while the mining sector's growth is estimated to be 2.4%, down from 11.5% in 2021-22.
• 📉 The current projections are lower than the government's earlier forecast of 8 to 8.5% growth but are above the Reserve Bank of India's (RBI) projection of 6.8%.
• 🌐 The RBI had lowered the GDP growth forecast due to continued political tensions and tightening global financial conditions.
• 📊 The first advanced estimates by the National Statistical Office (NSO) are subject to revision, with historical data showing revisions can change the GDP growth rate by almost one percentage point.
• 💡 The nominal growth rate of 15.4% indicates high inflation, reflecting adverse terms of trade and stronger global headwinds affecting the Indian economy.
• 🌐 The impact of global headwinds, such as the situation in Europe, may pose spillover risks to India's macroeconomy, particularly affecting export industries like auto and IT sectors.
• 🚧 Business confidence may be affected by prolonged uncertainty due to global crises, which could impact private investment and economic recovery.
• 🛠️ Structural challenges in the Indian economy, such as private capital expenditure not picking up despite high capacity utilization, indicate a need for new solutions to stimulate growth.
• 🏭 The importance of structural reforms, including the simplification of the Goods and Services Tax (GST), improving ease of doing business, and investing in skills development and infrastructure, is highlighted for sustained economic growth.
• 💼 The central government's fiscal conservatism and the expectation of continued prudent budgeting are seen as positive steps towards managing fiscal deficit and supporting private investment.

Q & A

What is the estimated growth rate of the Indian economy in the 2022-23 fiscal year according to the fast Advance estimates?

The Indian economy is estimated to grow at 7 percent in the 2022-23 fiscal year, which is down from 8.7 percent a year ago as per the fast Advance estimates of national income released by the national statistical office.

Which sectors are primarily responsible for the deceleration of the Indian economy's growth rate?

The deceleration in the Indian economy's growth rate is mainly due to the poor performance of the Mining and Manufacturing sectors.

How has the output of the manufacturing sector changed from the previous fiscal year to the current fiscal year?

The manufacturing sector output is estimated to decelerate to 1.6 percent in the current fiscal from 9.9 percent in the previous fiscal year.

What was the estimated growth rate for the mining sector in the current fiscal year, and how does it compare to the previous year?

The mining sector growth is estimated at 2.4 percent in the current fiscal year, which is a decrease from 11.5 percent in the previous fiscal year.

How does the current projection of 7 percent growth compare to the government's earlier forecast?

The current projections are lower than the government's earlier forecast of 8 to 8.5 percent growth.

What was the Reserve Bank of India's (RBI) projection for the country's GDP growth for the current fiscal year, and how does it compare to the fast Advance estimates?

The RBI had lowered the country's GDP growth forecast to 6.8 percent for the current fiscal year, which is below the fast Advance estimates of 7 percent growth.

What are the potential implications of the global political tensions and tightening of global financial conditions for India's economy?

The global political tensions and tightening of global financial conditions could lead to stronger headwinds for the Indian economy, affecting its growth and posing challenges for the upcoming fiscal year.

What factors could influence the Union budget in light of the recent economic growth estimates?

The Union budget could be influenced by the recent economic growth estimates, the deceleration in manufacturing and mining sectors, and the need to address the challenges posed by global headwinds.

What are the potential spillover risks to India's macroeconomy from the global economic slowdown, particularly in Europe?

The potential spillover risks include difficulties for Indian companies in sectors like auto and IT that are heavily dependent on Europe as a key market, which could face a slowdown or recession.

How might the prolonged uncertainty due to global headwinds impact business confidence in India?

Prolonged uncertainty could impact business confidence by slowing down private investment, affecting the recovery and expansion of businesses, and creating challenges for the Indian economy.

What are some of the structural reforms and initiatives that could help India navigate the current economic challenges?

Structural reforms and initiatives could include improving ease of doing business, investing in skills development and hard infrastructure, promoting digitization, and ensuring fiscal discipline to create a conducive environment for private investment and growth.

Outlines

00:00

📉 Economic Growth Projections and Sectoral Analysis

The Indian economy is anticipated to grow at 7% in the 2022-23 fiscal year, a decline from the previous year's 8.7%, as per the National Statistical Office's fast advance estimates. This deceleration is primarily attributed to the poor performance of the mining and manufacturing sectors. The manufacturing sector is expected to slow down to 1.6% from 9.9%, while the mining sector's growth is estimated at 2.4%, down from 11.5%. Despite these projections being lower than the government's initial forecast of 8-8.5%, they surpass the Reserve Bank of India's (RBI) projection of 6.8%. The RBI had previously lowered the GDP growth forecast due to ongoing political tensions and tightening global financial conditions. The discussion also includes the analysis of different forecasts, growth projections for various sectors, and the challenges that lie ahead, with distinguished guests Mr. Shubham Bhattachary, Mr. R Gopalan, and Mr. Rajiv Mantri sharing their insights.

05:03

🌐 Impact of Global Headwinds on Indian Economy

The script discusses the implications of the first advanced estimates by the NSO and the potential impact of global headwinds on India's macroeconomic situation. It highlights that despite the initial estimates projecting a 7% growth, there could be a statistical correction leading to a possible upward revision of the growth rate. The conversation emphasizes the importance of the upcoming budget, inflation concerns, and the nominal growth rate of 15.4%, indicating high inflation and adverse terms of trade. The potential spillover risks from a struggling European economy and the challenges faced by India's export industries are also discussed. The panelists, including Mr. Mantri, express concerns over the persistent global uncertainties affecting business confidence and the slow recovery and expansion of the economy.

10:04

🛠️ Structural Reforms and Private Investment Challenges

The third paragraph delves into the challenges of private investment in India, despite high capacity utilization rates nearing 80%. The discussion points out that while there are positive indicators within the Indian economy, such as a recovery in the services sector and auto sales, private capital expenditure remains sluggish. The panelists, including Mr. Bhattachary, address the structural challenges faced by the Indian economy, such as the need for new solutions to stimulate private sector investment and the importance of government investment in rural infrastructure to boost consumption. The conversation also touches on the government's efforts to induce private sector investment and improve ease of doing business, as well as the importance of skills development and infrastructure.

15:04

🌟 India's Economic Resilience Amidst Global Uncertainties

The script highlights India's relative stability and growth amidst global economic challenges. It acknowledges the country's ability to maintain a 7% growth rate despite struggles faced by other economies and inflation concerns. The panelists discuss the importance of structural reforms, such as the implementation of the labor codes and the promotion of manufacturing capabilities through production-linked incentive (PLI) schemes. They also address the issue of energy imports and the government's efforts to reduce dependence on oil through initiatives like ethanol blending and the promotion of electric vehicles. The conversation underscores India's economic management and the need for continued reforms to leverage the country's strengths in the services export sector and deepen global value chain participation.

20:05

🏛️ State Government Challenges and Fiscal Reforms

The focus shifts to the challenges faced by state governments in India, particularly in managing capital expenditure and the implementation of structural reforms. The script points out that despite the central government providing significant funds to states, there is a lack of progress in capital investment, which is attributed to the state bureaucracy's limited capacity to handle such projects. The conversation discusses the need for state governments to improve their ability to execute capital expenditure and the importance of public-private partnerships in addressing the backlog of projects. The panelists also touch on the fiscal conservatism of the central government and the expectation of a continued conservative budget to manage fiscal deficit and support private investment.

25:06

📉 Inflation Concerns and Future Economic Outlook

The final paragraph addresses the concerns of inflation from the perspective of both the common man and the RBI's role in managing it. The script discusses the structural issues related to state governments and the need for improvements in expenditure and research and development (R&D) to enhance productivity. It also mentions the potential impact of increased customs duties on supply chains and competitiveness in manufacturing. The panelists express optimism about a decrease in inflation levels in the coming year, with expectations that the RBI will not impose further tightening measures that could affect the public. The conversation concludes with a hopeful note on the potential for improvement in the Indian economy's performance and the importance of avoiding further fiscal tightening by the RBI.

Keywords

💡Economic Growth

Economic growth refers to the increase in the production of goods and services of an economy over a period of time. In the video, it is discussed that the Indian economy is estimated to grow at 7% in the 2022-23 fiscal, which is lower than the previous year's 8.7% growth. This concept is central to understanding the overall health and performance of the economy.

💡Manufacturing Sector

The manufacturing sector is a critical component of the economy that involves the production of tangible goods. The script mentions that the manufacturing sector output is estimated to decelerate to 1.6% in the current fiscal from 9.9% in the previous year, indicating a significant slowdown that impacts the overall economic growth.

💡Mining Sector

The mining sector is involved in the extraction of natural resources such as minerals, metals, and coal. The script indicates that the mining sector growth is estimated at 2.4% in the current fiscal, down from 11.5% in the previous year, showing a substantial decrease that contributes to the overall economic slowdown.

💡Reserve Bank of India (RBI)

The Reserve Bank of India is the central banking institution of India, which is responsible for monetary policy, regulation of the financial system, and management of the country's foreign exchange and gold reserves. The script mentions that the RBI had lowered the GDP growth forecast for the current fiscal due to political tensions and tightening of global financial conditions.

💡Global Financial Conditions

Global financial conditions refer to the state of the world's financial markets and the broader economic environment. The script discusses how the tightening of these conditions has influenced the RBI's decision to lower the GDP growth forecast, reflecting the interconnectedness of national economies with global financial health.

💡Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. The script mentions a nominal growth rate of 15.4%, indicating high inflation in the Indian economy, which affects the cost of living and the value of currency.

💡Fiscal Deficit

A fiscal deficit occurs when a government's total expenditures exceed its total revenues. In the context of the video, the script discusses the importance of the Finance Minister's decisions regarding fiscal deficit, which is a key economic indicator reflecting the government's financial health and its impact on the economy.

💡Capital Expenditure

Capital expenditure refers to the funds used by a company or government to acquire, upgrade, and maintain physical assets. The script highlights the government's high capital expenditure but notes a lack of private capital expenditure, which is a concern for future economic growth and investment.

💡Structural Reforms

Structural reforms are changes made to the fundamental structure of an economy or sector to improve its performance and competitiveness. The script discusses the need for structural reforms in India, such as simplifying the Goods and Services Tax (GST) and improving the ease of doing business, to boost productivity and attract investment.

💡Goods and Services Tax (GST)

The Goods and Services Tax is a comprehensive, multi-stage, destination-based tax levied on every value addition. The script mentions the need for GST reform, indicating that simplification of the tax system could be beneficial for economic growth by reducing the tax burden and improving compliance.

💡State Governments

State governments in a federal system like India have significant autonomy and responsibility for certain areas of governance, including taxation and infrastructure development. The script points out that state governments are not effectively utilizing capital expenditure funds, which is a structural issue hindering economic development and investment.

Highlights

The Indian economy is estimated to grow at 7% in the 2022-23 fiscal, down from 8.7% a year ago.

The deceleration is mainly due to poor performance of Mining and Manufacturing sectors.

Manufacturing sector output is estimated to decelerate to 1.6% from 9.9% in the previous fiscal.

Mining sector growth is estimated at 2.4%, down from 11.5% in the previous fiscal.

Current projections are lower than the government's earlier forecast of 8 to 8.5% growth.

RBI's projection of 6.8% GDP growth is lower than the current estimates.

Political tensions and tightening of Global Financial conditions have led to a lowered GDP forecast by the Reserve Bank.

The first Advanced estimates by the NSO project a 7% growth, aligning with economic indicators.

The service sector is picking up, but the manufacturing and mining sectors are not showing good signs.

There is an expectation of a slowdown that will be reflected in the upcoming fiscal year.

The importance of the budget and its influence on the economy is highlighted, especially with the slowing economy.

The nominal growth rate of 15.4% indicates high inflation despite the rise in the value of the dollar.

The terms of trade have become more adverse, indicating stronger global headwinds.

The Indian economy's recovery is taking place, but global headwinds are worsening for the upcoming fiscal year.

Export industries, particularly in the auto and IT sectors, may face difficulties due to a struggling European economy.

Business confidence may be impacted due to prolonged uncertainty from global crises and supply chain disruptions.

Private investment is not picking up despite high capacity utilization, indicating a structural challenge for the Indian economy.

The government has been pushing for private capital expenditure, but it has not been high, posing a concern for economic growth.

Consumption in rural areas has not picked up as expected, affecting investment, especially private investment.

The government's investment in rural infrastructure could kickstart consumption by providing income to rural labor.

Structural changes are required to induce private sector investment and improve ease of doing business.

The need for states to improve their capacity to handle capital investment and reduce backlog in projects is emphasized.

Fiscal conservative budgets are expected to continue, which will be beneficial for the economy by controlling fiscal deficit.

The output gap due to the COVID-19 pandemic is a pressure point for the Indian economy, especially affecting the poor.

Inflation is expected to improve in the next fiscal year, with the Reserve Bank of India positioned to manage it effectively.

The importance of structural reforms such as the implementation of the direct tax code and reduction of customs duty is discussed.

Transcripts

[Music]

foreign

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you're watching perspective the Indian

economy is estimated to grow at seven

percent in the 2022-23 fiscal down from

8.7 percent a year ago as per the fast

Advance estimates of national income

released by the national statistical

office this clip is mainly due to poor

performance of Mining and Manufacturing

sectors the manufacturing sector output

is estimated to decelerate to 1.6

percent in the current fiscal from 9.9

percent back in 2122 similarly mining

sector growth is estimated at 2.4

percent in the current fiscal as a guest

11.5 percent in 2122 although the

current projections are lower than the

government's earlier forecast of 8 to

8.5 percent growth they are above the

RBIs projection of 6.8 percent remember

the Reserve Bank had lowered the

country's GDP growth forecast from 7 to

6.8 percent for the current fiscal owing

to the continued political tensions and

also tightening of Global Financial

conditions so we'll analyze the

difference in forecasts also growth

projections for different sectors and

the challenges ahead with distinguished

parties joining us on the program

pleased to have in the studio with us Mr

shubham my bhattachary Consulting editor

the business standard thank you Mr

bhattaraji for your time welcome to the

program and joining us virtually are Mr

R gopalan former secretary Financial

Services Ministry of Finance and Mr

Rajiv mantri founder and MD navam

capital thank you gentlemen for joining

us on this edition of the program

Mr gopalan let me begin the program

today with you the first Advanced

estimates by the NSO project a seven

percent growth is this on the expected

lines

well uh from various main indicators

that came about during this year this

was expected manufacturing was in any

case showing not a very good sign right

then Mining and others were also not

very good and services were just picking

up

so it was expected that this would

really come down this year and it has

come down

uh there are two three issues under

which one would like to assess this one

inter say between various components of

the economy how things have moved or

shifted

second will be what the budget holds

what these numbers will influence the

budget as

and third one will be what does what

does it hold for us in 23 24 so these

are some of the things which we should

look at it if you have the time but

basically the fact remains that there is

a slowing down and I believe that this

will get reflected in 43 to 34 as well

right so coming just ahead of the Union

budget uh how significant are these

numbers the estimates of the NSO

will taking on from what Mr gopal was

saying two things very important first

of all uh

there is a lot of I mean we have seen

the deceleration

but the interesting thing to remember is

these is are the first Advanced

estimates

our history of statistical correction

which typically happens because remember

there will be a revision of this number

in May this year then again next year

and there will be subsequently two more

so at least three more usually five

revisions happen and all uh I mean if

you look at the revisions of GDP that

happens the interesting thing is that

they are actually almost changes by

almost one percentage point so seven

percent they would actually when it

finally the numbers are sort of you know

taken on as a final numbers could

actually be closer to eight

that's a significant thing a growth rate

of closer to eight

four twenty two four FY 23 is actually

something which is very impressive so

even as seven percent is good so that's

some so I would say that the numbers

would be we should be looking at what

the subsequent numbers but the point

about that you said about the budget

would be something

that

the important thing to see there is what

is happening on inflation

the interesting thing is that the

inflation the nominal growth rate that

we are looking at is 15.4 percent

which means the Indian economy despite

the rise

in the Valley of the dollar

has actually still recorded a nominal

there's an inflation growth rate of uh

is has been fairly high so which means

that the terms of trade has been even

become even more adverse

that's important because

it actually shows that the headwinds

have become far more stronger from

globally

so two takeaways from this data shows

that first of all that first connection

that I talked about seven to eight

percent shows that the Indian economy

per se is not doing that

the recovery has been taking place and

the recovery is actually starting to

rise and will actually look better

the second thing is that the global

headwinds are possibly even worse so for

23 24

these are going to be even were even

more severe factors to be accounted for

and that is what Finance Minister nimela

sithiraman will be taking on because

when she decides that what are the

numbers that she'll be doing

fiscal deficit

then the growth Capital account capex

growth rate that she's been looking for

these are the constraints that should be

looking for the Indian economy it's fine

the rest of the world the headwinds are

looking as bad probably worse in 23

beginning of 23 than in the beginning of

22. right I'll leave it at that time

okay uh Mr mantri your perspective on

how these you know Global headwinds are

not just persisting but emerging

stronger and which could obviously be

problematic for us how do you see them

posing spillover risks to India's macros

and also uh if you look at the situation

uh particularly in Europe I think uh

their economies are really struggling so

certain of our export Industries are

probably going to uh be hit by that

so if you have a Slowdown or a recession

uh of a severe nature in Europe in 2023

chances are that the Indian companies

for whom you know in the auto sector on

the I.T sector and so on for whom Europe

was a key focused Market uh they could

see uh difficulties in this year and

obviously that will have Downstream or

other that will be a result of a

production uh challenges which will come

up because of a weakened demand in

Europe

and uh net net I feel uh

obviously no one knows when it will end

but the the situation the military

situation in Europe has taken a bigger

toll than most would have anticipated

and the war has gone on longer than most

people would have thought

so uh until things stabilize on that

front uh it will continue to be a

difficult situation for some of the

export industries of India the export

sector is already under immense pressure

Mr bhattacharji but do you somewhere

also see the business confidence also

having taken a hit because of this

prolonged uncertainty one after the

other we've been seeing these Global

headwinds so after the Russia crisis and

of course before that the pandemic as

well because of which the supply chain

disruptions so we've been able to

recover but because of these persisting

headwinds the recovery and the expansion

has not been as fast as we would have

anticipated and if they continue to you

know persist and become stronger as you

said in the coming year as well will the

business confidence also be impacted

somewhere well you know you know that's

a very interesting point that you've

raised why because at the beginning of

this year and I was wondering that I

should have brought my copy of my

business standard

the first day's news

about the Indian economy's business

was rather cheerful and that is exactly

what the point I'm saying if we look at

the auto sales even two-wheelers

you know they're they're falling off has

been arrested three wheelers is actually

recovered

if you look at the services sector the

contact intensive sectors

which were basically ones basically

heard by covet people were not going out

there's been a recovery that Services

sector growth rate according to the PMI

purchased by this index has run into a

10 months High

if you look at any other indicators

coming from within the Indian economy

they're all looking very bright

I wonder but yet as you said private

investment is not taking place why is it

so because as Mr Munster pointed out the

problem that's coming along is that a

company if it wants to expand capacity

if it is solely depending on domestic

demand

that'll be okay but most of our industry

and rightly so we have a strong export

Consignment to think about

and those export Consignments are not

really looking very bright

so the headwinds are therefore just from

there right and that is the thing that

we are you know trying to work out that

which is why you find a very critical

number which economists are talking

about and I'm sure Mr gopalan will be

talking about the private capital

expenditure

is not picking up

it is something which the government has

been pushing the government has been

because the government capital

expenditure has been high but the

private capital expenditure has not been

high and despite the fact that the

capacity utilization is now almost

reaching 80 percent this is the time

when you would expect private sector to

actually start expanding talking about

new construction projects to take up but

that's not happening so that is

something that is a cause for worry and

that is where we shall be hearing more

in terms of what further steps can be

taken on and this is structural

challenge of a new type for the Indian

economy we never have this sort of a

channel we used to have challenges of

different sound you know Supply

constraints a lack of capital lack of

Labor this is a very very I would should

say of our economy of the size that

India has become this is actually a very

smart sort of a development so we shall

actually have to be looking out for new

ways in which to create solutions to

those and that's that's that's where uh

I mean I'll stop okay okay Mr gopalan so

I mean in the face of these newer

challenges what are the newer solutions

that actually we are looking at and we

should actually be uh going forth in

order to navigate these challenges

uh let me take from what uh Obama has

left off uh there is another aspect

which is Should Be watchful of is

regarding the consumption the

consumption in the rural areas is not

really I mean picked up it is trying to

pick up but not really I mean getting us

the attraction which we are required to

have so that has a effect on investment

especially private investment and

therefore that is going to be an issue

how the confidence of the consumers are

able to really come into discretionary

by

with the CPA levels with the core CPA

levels being what it is and CPA numbers

what they are there is going to be it is

going to take some more time for that to

really help in the consumption now

meanwhile how the incomes are going to

cover is something where it comes

through government investment for

instance if the government is going to

do investment uh more on the rural

infrastructure

which is labor intensive obviously I

mean the labor share of the uh or the I

mean I will really go which will give

them enough income to go ahead for

consumption so that is the way the

kickstarting or they're already started

but it has got to expand to expand a

little bit more before the private

sector really thinks the 74 75 capacity

utilization is uh just good enough for

them to go in for further I mean capital

investment well that's going to take

some time the confidence service which

Superman mentioned

are very split they are not I mean

innocent for the consumer side the

investment side and all those kind of

things they are a mixed picture which is

giving at this point in time and with

the headwinds which are going to come in

uh with this it's going to be a problem

at least for in the near future

so what are the structural changes that

are required to be done

well there are quite a good number of

things which uh government is help in

hoping on

for instance how to ensure that the

private sector is induced to invest

so how to create conditions for them to

feel confident that they can invest and

make money out of this

so and how to ensure that ease of doing

business is something which is taken

more uh seriously by the government

and how the government is able to invest

in other things like a skills

development the hardcore hard

infrastructure issues how the

digitization spreads very fast

and these kind of things will uh really

I mean help a great deal in ensuring

that the growth really takes off the way

it should

Mr mantri the fact that you know the new

year started with a lot of Hope and

positivity the fact that India has been

in a relatively better you know spot as

as compared to the other uh leading

economies but the challenges will

continue to emerge stronger and we've

discussed as the global headwinds

continue to persist the forecasts

continue to be revised so the IMF

brought down it number its numbers the

RBI had to bring down the numbers but at

the same time we need to also leverage

our strength existing strength and that

is on the services export sector the

deputy managing director of the IMF had

said that you know in order to do so we

need to extend it to job-bridge

manufacturing exports by deepening the

global value chain participation

complementary structural reforms that we

just spoke about which will boost

productivity formal employment and

exports all of this sounds very good but

in the face of these challenges the fact

is structural reforms is something that

the government is taking care of but on

the export sector the widening Gap that

we are continuing to see this is

something that is going to be extremely

difficult

to no doubt that I think India has done

very well if you look around the world

and look at the state of other countries

uh Even in our own neighborhood the

Southeast Asian economies the other

South Asian countries uh we are really

actually a island of uh kind of

Excellence or island of stability in

this region we are able to rest a seven

percent growth in a year like this where

frankly most economies have really

struggled uh for the most part inflation

has also not been that severe in India

uh and and overall I think it speaks to

the excellent economic management by the

government that we managed to achieve

this now having said that I do believe

uh you know many of the structural

reforms need to keep getting that

impetus for example uh the label or uh

codes which were passed by parliament

are yet to be implemented by state

governments and we are still waiting for

that to happen uh I think it's been

probably close to two years now since

Parliament cleared them but there is no

uh actually nothing in the media or no

information available as to when it

might get implemented by States

uh and and if we are looking to balance

our economy I think we are already sort

of lying heavily on Services exports I

do not I'm not of the school of thought

that more can be done on Services

exports I do believe that India needs to

build up manufacturing capabilities

and uh much has been done by the

government on that front actually with

the pli schemes and other initiatives uh

to bring up like domestic industry so so

uh on the particular point of uh

uh the dependency that we have on for

example energy Imports which put a

certain macroeconomic pressure on the

country I think government has also been

doing everything that it can in terms of

mobilizing sort of uh the sugar sector

to go for blending or ethanol and uh

achieve achieve uh you know some level

of blending so that we are able to

reduce that marginal amount of oil

import

electric vehicles so if you look at

whether it's uh two wheelers three

wheelers or four wheelers uh India is

electrifying its transport its uh

vehicle base very rapidly I think it is

happening most rapidly with three

wheelers than with two wheelers and then

four wheelers will take some more time

probably because of the cost aspect like

the electric vehicles tend to be more

pricier and what India actually needs is

like a four lakh five lakh electric

vehicle we have not got to that price

point yet so so my view is we should

keep doing whatever we can there will

always be you know certain Global

pressures and shocks like that I mean

frankly when has that not not happened

right like if you look back over 15 20

years it's always been something or the

other which is brewing and kind of

disrupting uh uh uh as a force but but

as long as we continue to do whatever we

can then you know we will somewhere come

out ahead when the headwind started to

Tailwinds

okay so uh you know that optimism Mr

bhattachary explains the transformation

that India has seen with relative ease

in several sectors but when we talk

about the structural reforms how much of

an important role does simplification of

the goods and services tax have to play

that is one area that we've been

speaking about but it's not been

implemented it's not been done uh so far

so how much of a roadblock is that also

causing that is quite something in the

sense that the tax rates also I mean

let's take cement cement gets taxed at

28 percent now cement is both used by

the individuals I was building by

anybody as well as by the industry so uh

that's a that's that's the tax rate that

frankly is something which is creating

difficulty uh but then it's also

something on which both the center and

the states have to come together so GST

reform and if you mean on that context

reducing the uh sort of the the whatever

it's called the the basic rate to

something like uh 14 or something is

something that's definitely going to be

very good for the economy there's no

doubt about it uh I would say that the

one problem that's coming up and which

has not been flagged is that the States

you remember this year the central

government has and last year too but

since this year definitely has given

about one lakh crore that's one trillion

to state governments to jump start

capital investment

from the data that comes up it shows

that the states have not really moved on

it much

and I have a reason to understand why

the reason is States per se are very

good at handling consumption expenditure

they are not the state Machinery the

state bureaucracy is not almost in Most

states very good at handling capital

investment and this is actually hurting

this year we would expect the government

to actually push more central government

to push more money to the states to push

capital expenditure but states that is

one structural reform that is very

necessary for the states to ramp up in

the capacity within the bureaucracy to

be able to take projects and deliver

this is something which the states have

actually been not only lagging but

they've also been on defensive they've

not they've been not been coming up to

say where is the problem

PPP adjustments I mean public private

partnership writing those things getting

those projects implemented Most states

have a tremendous backlog there that is

what you're seeing

Mr gopalan was talking about rural

development not happening well I can

assure him one of the reasons why not

threatening is it's not supposed to

putting in consumption money

investment by the state governments is

not happening

and that is where that is where a

serious challenge needs to is has

developed and needs to be sorted or does

it say these are new economy challenges

for the Indian India never used to

happen we never had the cash to be able

to give that money now the cash is there

it's not getting spent so that's one

major thing

a very good reform that the central

government has done is being fiscally

conservative

for the last two years Finance Minister

has been presenting a conservative

budget

we are very hopeful that she'll be

continuing that Trend because it's very

nice to under

promise and over deliver

and that is something that we'll be

expecting this year uh that actually

will be very good for all round because

it will push down the fiscal deficit

it will actually ensure that other

pressures on the private investment do

not come up the government is spending

more

the government's borrowing calendar is

actually making us hopeful that yes that

is what will be happening

you would have noticed that citibank's

latest reporters say that the current

account deficit of India which they had

picked at 3.7 percent they have scaled

it down to less than three percent which

shows that the economy has been able to

start balancing itself much more

so you know I'm talking about the hard

numbers the only challenge that is there

which is because of the covet cap

there's an output Gap in the Indian

economy what Indian economy should have

been at this stage compared to if the

covet had not happened there that Gap is

naturally going to hurt the poor more

because they are their bottom of speech

and that is where the challenge is but

for that consumption to be actually

brought back

several layers of the economy have to be

working along

of which I think one major thing which

the state government is the state

government remember they account for 65

percent of the government budget of the

total government budget it's not working

as of now so that's that's something

that we need to work on but that output

but even after that there will be that

Gap and that Gap is the pressure point

in the Indian economy in terms of the

consumption which which which which will

take a bit more time to create through

but it was something which kovid had

dealt and uh we are doing I mean most

sectors of the Indian company have

actually dealt with it far more

responsibly than many other economies

but you know since you spoke about uh

hurting the masses let me take one

question on the inflation problem from

Mr gopalan Mr gopalan from the common

man's perspective how big a worry is

inflation going to be both from our

perspective and also from the

perspective of RPI in taming inflation

in the times to come

okay let me I mean I mean start off from

what Superman left I mean there are

structural issues which uh he pointed

out in regard to state governments there

are state governments who have been able

to uh very well improve me not uh

implement the capital expenditure

program there are good set of States

including States they come and not we

have been doing quite a good amount of

capital expenditure first the problem

there is that I mean the capacity of the

administrative system to absorb capital

expenditure is very limited because of

the way in which the private sector has

to be pulled in by the states to get the

capital expenditure conducted it's not

it is not done by the state government

themselves it is put in by various

contractors and others who are able to

be pulled in to get this expenditure

done that has not really I mean taken

off in some states but most States this

really happen that's an encouraging sign

I have seen on structural reforms I mean

before I get into inflation side there

are issues relating to uh what you call

that I mean r d issues which have to be

tackled how to ensure that India as a

system is able to improve its

expenditure and r d which will enable it

to really working to get into some

Innovative things which can really push

up the productivity side second thing I

am worried about is on the customs duty

increase which is taking place it will

hurt the supply chain uh seamlessly

across all countries we ensure that

competitiveness is ensured in our

manufacturing so that's an area where we

must be very careful and be very I mean

wise in doing that there are some areas

where it needs to be done but there are

some areas that we need to avoid we

should take a carousel view on that on

the income tax side I have a feeling

that the Myriad things which are going

wrong if a direct tax code is going to

be implemented it will give so so much

of certainty to the income tax tax

structure which I think is going to be

very useful for kickstarting Investments

on the inflation side as I say the

inflation is because of the commodities

prices are going down and we see WPA

showing signs of I mean deceleration

very drastically

the inflation levels are going to really

go down next year

I expect the CPA to be around about

average for next year is likely to be

about 5.4 to 5.5 per a five percent

the core is a big problem for me uh it

will take another six to seven months

for the core inflation to really come

down which will enable people to

Industry to pass on uh

uh I mean the price I mean uh increases

of inputs but by the time input prices

could have softened because commodity

prices are softening so generally I have

a feeling that in 2324 there is going to

be a good Improvement in the inflation

levels and RBA will be in a position to

work on that uh will be advantages to

them to look into how the I mean I think

let's all hope that there's no more

tightening from the RBI which eventually

impacts our pockets so with that I'll

have to wind up the program time allows

me to take up only that much on this

additional perspective thank you to all

of you for joining us on this edition of

perspective sharing your thoughts with

us in our viewers and to you viewers

thank you very much for your time I'll

see you same time on Monday now take

good care of yourselves keep watching

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