The economic advisor said that 'unprecedented steps' invite 'unintended consequences'
Principal economic advisor, Sanjeev Sanyal, said that the government had expected “some degree” of downturn in the economy post reforms like demonetisation and GST and that the government expects a recovery early next year.
“We did expect some degree of downturn,” said Sanyal adding “when you are dealing with so many unprecedented measures, you have to expect unintended consequences”.
Sanyal was speaking at India Economic Summit held in New Delhi last week. Batting for the government, he said that the government was “aware” of the slowdown, but it was all in good faith.
“We acknowledge the slowdown… (But) you need to see this in a wider context. Very major reforms have been rolled out very-very quickly,” he said.
Talking to Moneycontrol, he said, “Government expects the economy to recover by early next year”.
India’s quarterly growth has been going southward after demonetisation. It fell from 7 percent during Q3 of FY17 to 5.7 during Q1 of FY18.
Sanyal, however, said that the pain is for “short term” and that, it would be fixed in “days, not weeks”.
“5.7 percent is a pretty strong growth,” he said adding that the falling growth could be cushioned against strong “macro stability numbers”.
“Macro stability numbers are dramatically improved more than USD 400 billion foreign exchange reserve, current account deficit for last one year was below one percent… and inflation is now, for this financial year averaged at 2.5 percent”.
He also informed that steps like demonetisation, GST, Insolvency and Bankruptcy code (IBC) and Real Estate Regulation Act (RERA) were all in the direction to change the way economy has been working till now.
“Whether you like it or not, demonetisation was a bold move… GST is (being) rolled out... Major clean-up of the banking sector using a brand new bankruptcy code (is being done)… The point is you need entrepreneurial economy,” he said.
“You’re shifting the paradigm on which India’s economic activity is done… Culture of doing the business have been changed,” he added.
On the sidelines, he told Moneycontrol that government might let the reforms play out for now. He said that Indian economy was changing and that recovery was a process.“It’s (reform and recovery) is a process… The government will not shy away from acting on it,” he said.