From talking of V-shaped, and then K-shaped recoveries, Indian government’s economy wizards seem to have hit upon another alphabet to explain the post-pandemic state of the nation’s finances — a W-shaped recovery.
Or a tilted W at that, if you go by Principal Economic Adviser Sanjeev Sanyal — of indices crashing every time there is a spurt in infections, followed by a sharp uptake.
Ahead of the Union budget on February 1, the Economic Survey tabled in Parliament on Monday has painted an economy in full recovery mode, yet that could still get derailed by global factors ranging from oil prices to inflation.
For its part, the Economic Survey has adapted a more realistic approach to the state of post-pandemic economy, painting a picture of optimism, yet with caution and caveats fully applicable.
The survey pins India’s GDP growth this financial year at 9.2 per cent, and expected to be in the robust 8-8.5 per cent band in the coming financial year — meaning India could be the fastest growing major economy in the world in financial year 2023. The survey speaks of steady revival of economic activities, spurt in exports, rise in direct and indirect taxes and a more than comfortable buffer in the foreign exchange reserves.
However, neither Sanyal who essentially prepared this year’s survey, nor his newly-anointed boss and Chief Economic Adviser V. Anantha Nageswaran, who took charge just this weekend, shirked away from the glorious uncertainties that could spill up their ‘glass almost full’ storyline.
“It is good to have recovered, but we continue to remain in uncertain times,” said Sanyal, interacting with media after the tabling of the report by the finance minister in Parliament.
The two economic advisers pointed out though matters remained in control, there could still be a slip between the cup and the lip. The reasons range from the possibility of further waves of Covid-19 popping up in the coming months, record-levels of inflation seen recently, the crazy spike in global oil prices, and the fact that the recovery remains incomplete when it comes to many sections of the service sector, especially the job-intensive travel, tourism and hotel industries.
Then there is also the politically explosive issue of jobs. “There was significant decline in jobs during lockdown,” admitted Sanyal, who argued that there has been a pick-up since then, even if macro data was not available. Instead, he pointed to how the central government’s rural job guarantee scheme MNREGA showed lesser numbers after an increase during lockdown, and the sharp increase in those covered by the Employee Provident Fund (EPFO), even as he admitted that may only refer to formalisation of jobs.
“India’s inflation is still within tolerance threshold,” said Sanyal, despite wholesale inflation hitting three-decade highs recently — North Block’s optimism probably stems from the fact that the consumer price index has not been equally troublesome (so far). However, the big worry of high inflation (prices) further worsening private consumption leading to low business activity still remains.
And rising oil prices only adds to the future worries, besides supply side shocks like container charge hike, chip shortages and commodity cycles. Many of the survey predictions are based on oil prices remaining in the 75 dollar per barrel rate, while the present global rate is around 90.
However, CEA Nageswaran felt that the lowering of growth forecasts for the whole world as indicated by the IMF could actually help in moderating the demand for oil.
In the end, all optimistic projections stop short at the prospect of further pandemic waves. But if you go by the Economic Survey, there is a silver lining to that as well. “There will be no more waves, just some trickle,” quipped Nageswaran. That will be crucial to a full recovery, especially that of India’s services sector.
