PM’s Economic Advisor Says Economy May Shrink 5-7%, Massive Infrastructure Push Needed
- 3 years ago
In a 44-minute interview to Karan Thapar for The Wire, Sajjid Chinoy explains at length both his analysis of the economic condition of the country as well as his recommendations for getting back to 7-8% levels of growth without pushing the fiscal deficit or the country’s debt to GDP ratio to unsustainable levels.
Dr. Chinoy began by explaining that for the three years prior to January 2020, when Covid first appeared in India, growth had slowed to 4% levels. Exports, which had been growing at 18% in the 2002-2010 period, with investment responding similarly, shrank to an average of 2.4% growth over the last six years. Investment also thereafter contracted. For a while, after 2013, consumption, both private and public, was able to drive growth. However, during the three years prior to Covid households began to perceive the slowdown and accordingly adjusted their consumption downwards. This, combined with an increasingly impaired financial sector, reduced private consumption to 5.3%, the lowest since the global financial crisis. Consequently, India entered Covid-19 with three of the four engines of growth (exports, investment and private consumption) considerably slowing down and only one engine, government spending, firing. Dr. Chinoy said the financial sector was “flying on one engine”.
Dr. Chinoy began by explaining that for the three years prior to January 2020, when Covid first appeared in India, growth had slowed to 4% levels. Exports, which had been growing at 18% in the 2002-2010 period, with investment responding similarly, shrank to an average of 2.4% growth over the last six years. Investment also thereafter contracted. For a while, after 2013, consumption, both private and public, was able to drive growth. However, during the three years prior to Covid households began to perceive the slowdown and accordingly adjusted their consumption downwards. This, combined with an increasingly impaired financial sector, reduced private consumption to 5.3%, the lowest since the global financial crisis. Consequently, India entered Covid-19 with three of the four engines of growth (exports, investment and private consumption) considerably slowing down and only one engine, government spending, firing. Dr. Chinoy said the financial sector was “flying on one engine”.