Largest 50 NPA Cases Top Priority: Sanjeev Sanyal, Principal Economic Advisor
In a freewheeling conversation with BW Businessworld’s Suman K. Jha and Manish Kumar Jha, Principal Economic Advisor in MoF Sanjeev Sanyal talks about the state of the economy.
Excerpts:
How do you look at the state of the economy?
The economy is gathering pace. We got a particularly strong number for India’s GDP which grew at 8.2 per cent in the first quarter of the financial year (2018-19). Admittedly, that particular reading was helped by the base effect from last year’s GST introduction, but even if you strip the base effect, the economy is definitely growing at 7.5 per cent or more. And, with this growth rate, we are the fastest-growing economy in the world. This momentum also reflects in other economic indicators as well. Our export and import numbers have gone up sharply, both suggesting acceleration. Nonetheless, despite the acceleration in growth, we have also managed macro-economic stability. Inflation and the fiscal deficit are within control.
The one area we need to watch closely is the current account. Not only does the acceleration of growth lead to higher imports but we also have to contend with higher global oil prices over which we have no control. This is something we need to watch out for very carefully.
How do you view the rising oil prices?
We are an oil importing county and we have little control over global prices. All we can do is reduce some taxes domestically, and some states may have a bit of space for that. But remember, every time you reduce taxes you are cutting back spending somewhere in the economy.
Some states have taken the lead in this regard. What is your opinion?
Those states that have the fiscal space may do it. But be clear that the space is limited for the country as a whole.
Do you think that there is a case for bringing petrol prices under the GST regime?
I am not aware if there is any immediate proposal in this regard. But let me be clear that GST is no solution for the problem posed by high oil prices.
Do you think rising crude prices and a falling rupee are major concern areas?
Rising oil price is obviously a concern, but the rupee issue is more complex. The rupee has depreciated significantly since the beginning of the year, but if we take a longer perspective of five years, the rupee has not really depreciated much against any currency except the US dollar. From that perspective, I would argue that the rupee has been reasonably stable and the real effective exchange rate, which had appreciated quite a lot, has corrected.
There are apprehensions that 78 large companies are facing dissolution under the Indian Bankruptcy Code. What is your take on this issue?
This is the legacy of an irresponsible lending boom during the period from 2006 to 2012. Now we are liquidating, auctioning and resolving these problematic assets through the IBC process. This is a good thing, not a bad thing.
What are the major challenges that you foresee in the economy?
The key issue is to ensure that the banking system, which is under stress for quite some time, gets cleaned up and running again. The 50 largest NPA cases should get resolved. Then banks can resume normal lending. That is priority number one. Priority number two is to make sure that liquidity conditions in the financial markets remain stable and market trading should happen smoothly.
