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RBI’s growth estimate ‘exaggerated’ as it fails to reflect state of informal sector: Montek Singh Ahluwalia

Montek Singh Ahluwalia lauded export growth of 64.4 percent but said that there are concerns on whether it will continue into the rest of the year as shortages of containers has led to a sharp rise in transport costs which could weaken performance.

October 17, 2021 / 01:11 PM IST
Montek Singh Ahluwalia (REUTERS/B Mathur)

Montek Singh Ahluwalia (REUTERS/B Mathur)

Montek Singh Ahluwalia who was the Deputy Chairman of the erstwhile Planning Commission of India during 2004-2014 said that the economy is recovering but the real challenge is how to ensure that once the recovery is over by next year “we don’t just get back to the 4 to 5 percent growth observed before the pandemic.”

“This will not lead to the kind of employment growth we need. We should aim at 7 plus percent, calibrate our policies to that objective, and also judge success against that target,” he said during an email interview with The Economic Times.

Ahluwalia lauded export growth of 64.4 percent but said that there are concerns on whether it will continue into the rest of the year because shortages of containers has led to a sharp rise in transport costs which could weaken performance.

“As a general rule however high export growth is good and government should give top priority to attending to practical problems exporters may have,” he said.

Speaking on the role of consumption and investment in determining the GDP growth, the Padma Vibhushan awardee predicted that private consumption is expected to revive automatically as growth resumes, employment increases and household incomes expand.

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“The consumption needs of the poor are in a different category. This does need special attention. Some steps have been taken, but more can be done for the duration of abnormal conditions. There are reports that demand for work under MNREGA exceeds what is on offer because states don’t have funds. There is a case for providing extra funds even at the cost of a slightly higher fiscal deficit. Government can help to restore household confidence by ensuring that the ambitious vaccination target is met,” he told the publication.

He added that Private investment will only revive after capacity utilisation in the economy gets back to normal levels and potential investors see the need for expanding capacity. “Since this may not happen until next year, there is a case for expanding public investment in many areas where it is clearly necessary such as health and transport infrastructure.”
Moneycontrol News
first published: Oct 17, 2021 01:11 pm

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