Strong message from the CEA: Govt focus will be entirely on policies; no big bang reforms on the anvil this year
After giving policy recommendations in the Economic Survey presented on Monday, Chief Economic Adviser Arvind Subramanian said that there is less scope for Reserve Bank of India (RBI) to lower interest rate with growth picking up and inflation hardening.
He said that relative to the last 18 months India is close to the inflation target and because of that the case for monetary easing is less persuasive. “We are close to the inflation rate,” said the CEA to CNBC-TV18.
With less than 48 hours left for Budget 2018, Subramanian has made it clear that a populist Budget may not be on the cards as "election year does not mean fiscal populism".
Before going to Davos, PM Narendra Modi had indicated in a television interview that this Budget won't be populist despite the general perception that the government will dole out sops in its last full Budget before the 2019 general elections.
He also mentioned the rising crude oil prices which has surprised the markets and that the medium term oil prices could be in the range of USD 60-65, depending on the Aramco listing. He further said that the monetary policy will have to take this into account.
Another strong message coming from him is that this year the focus will be entirely on policies, signalling that there will be no big bang reforms on the anvil.
He further said that NDA government believes in fiscal consolidation for its own sake and not for rating agencies. And steady reductions in debt and the deficit is what the government should aim for.
On NPA woes, Subramanian said that companies under NCLT will become cleaner and spend more. "It will establish the credibility of the resolution process. It will boost investor sentiment."
He added that clean, quick resolutions will have a big impact on the investment cycle.
He also spoke about the new tax regime and getting electricity, petroleum, and real estate under GST.
He said that government has made big progress on shrinking the 28 percent GST rate and that there’s scope for more."We have been able to respond to the GST challenges, iron out the glitches," he added.