New Delhi: Chief Economic Advisor V Ananth Nageswaran said on Thursday that global uncertainty is rising following recent developments in the United States and that governments, businesses and individuals should keep a ‘margin of safety’ in fiscal, corporate and savings account planning. He said the International Monetary Fund’s (IMF) global growth projections given in January look out-of-date and countries will have to watch what the developments in the US last week will have on confidence, bank credit growth and subsequent series of effects.
Two banks in the US have gone bust in the last week. Signature Bank, New York, which lends mostly to the crypto industry, was shut down by regulators on Sunday after their deposits plummeted.
Furthermore, the failure of Silicon Valley Bank The panic and panic hit many startups, tech companies, entrepreneurs and VC funds last week. SVB, the 16th largest bank in the United States, was shut down last Friday by the California Department of Financial Protection and Innovation, which subsequently appointed the FDIC as its receiver.
Speaking at the CRISIL India Outlook Seminar, Nageswaran said that uncertainty is on a rising trend and has gone up a few notches in the last week and is something that countries will have to live with not only this year but next year and beyond. Needed. ,
“And the important thing to remember is that when you are facing uncertain times, the important thing is to ensure that there is a margin of safety in our operations, be it for corporates or for investors. There is only one The guidance one can think of is to allow for a margin of safety, be it in fiscal planning, corporate planning or household balance sheet or savings account planning,” he said.
He said that if the events of the past week create a need for the Federal Reserve to stop raising interest rates, then we will have to wait and see what happens to real interest rates in the United States and its impact on the US. Will happen. Dollar.
“And also, what implications would this have for emerging economies, which I believe would be mostly positive in one sense, that is, the pressure on their currencies would be reduced. On the other hand, if the Federal Reserve were to go ahead with its tightening program, providing liquidity backstop and making some other arrangements to make depositors whole, we will have to wait and see what kind of domino effect it can create on other banking institutions and overall economy etc. It is quite difficult is the situation that central banks around the world, especially advanced economies, are facing,” Nageswaran said.
He said that at this point of time, it may be a bit difficult to gauge the net impact of these developments on countries like India. “The overall positive effects would be for global demand, for oil prices, and for US interest rates and the dollar. These kinds of reactions would be mostly positive for us, regardless of the impact on export growth,” he said.
“You can see how quickly things are developing, and it’s difficult for anyone to provide long-term guidance. It’s important, therefore, that we allow for uncertainty in our planning processes. And I think to some extent Till date, we have tried to do this in our fiscal policy,” Nageswaran said.
He said that India’s GDP growth is expected to be 7 percent in the current financial year. “If we are able to get through one more week with the current temperature, I think due to early sowing wheat crop will also… and we may be able to get a good crop. And it will have a positive chain Forward-looking responses to inflation, to agricultural production, to monetary policy, etc”.
With regard to the next fiscal, Nageswaran said the 6.5 per cent growth estimate has more downside risks than upside risks.
“Of course, all of this is subject to assumptions about how the world situation will look, both in politics and economics. A share of GDP, if you look at the figures for three quarters of the last five fiscal years, it has been rising,” he said .
He said that one should not be too optimistic while talking about 8-9 per cent GDP growth in the current environment. “If you can achieve 6.5-7 per cent or 6.4-7 per cent growth in the next 7-8 years till the next decade, we would have done very well”.
He said that the capital expenditure of the public sector has been increasing in the last several years and is increasing three times with focus on several sectors. Naturally at some point, public sector capex will have to take a step back and the private sector will have to step up. Nageswaran said public sector capex has created physical infrastructure for better manufacturing growth and export performance in the coming years.
The Chief Economic Adviser in the Finance Ministry also said that nominal GDP growth for the next fiscal year is assumed at 10.5 per cent, and though India remains optimistic, it is aware of the formidable challenges that face both developing and advanced economies .
“We need just 2-3 years of stable 10 per cent nominal GDP growth for fiscal parameters to show meaningful improvement. So while it is clear that the quality of expenditure is improving and there is still a There is room for improvement.” quantitative parameters, exaggerated arm twitch may not be necessary,” he said.
Two banks in the US have gone bust in the last week. Signature Bank, New York, which lends mostly to the crypto industry, was shut down by regulators on Sunday after their deposits plummeted.
Furthermore, the failure of Silicon Valley Bank The panic and panic hit many startups, tech companies, entrepreneurs and VC funds last week. SVB, the 16th largest bank in the United States, was shut down last Friday by the California Department of Financial Protection and Innovation, which subsequently appointed the FDIC as its receiver.
Speaking at the CRISIL India Outlook Seminar, Nageswaran said that uncertainty is on a rising trend and has gone up a few notches in the last week and is something that countries will have to live with not only this year but next year and beyond. Needed. ,
“And the important thing to remember is that when you are facing uncertain times, the important thing is to ensure that there is a margin of safety in our operations, be it for corporates or for investors. There is only one The guidance one can think of is to allow for a margin of safety, be it in fiscal planning, corporate planning or household balance sheet or savings account planning,” he said.
He said that if the events of the past week create a need for the Federal Reserve to stop raising interest rates, then we will have to wait and see what happens to real interest rates in the United States and its impact on the US. Will happen. Dollar.
“And also, what implications would this have for emerging economies, which I believe would be mostly positive in one sense, that is, the pressure on their currencies would be reduced. On the other hand, if the Federal Reserve were to go ahead with its tightening program, providing liquidity backstop and making some other arrangements to make depositors whole, we will have to wait and see what kind of domino effect it can create on other banking institutions and overall economy etc. It is quite difficult is the situation that central banks around the world, especially advanced economies, are facing,” Nageswaran said.
He said that at this point of time, it may be a bit difficult to gauge the net impact of these developments on countries like India. “The overall positive effects would be for global demand, for oil prices, and for US interest rates and the dollar. These kinds of reactions would be mostly positive for us, regardless of the impact on export growth,” he said.
“You can see how quickly things are developing, and it’s difficult for anyone to provide long-term guidance. It’s important, therefore, that we allow for uncertainty in our planning processes. And I think to some extent Till date, we have tried to do this in our fiscal policy,” Nageswaran said.
He said that India’s GDP growth is expected to be 7 percent in the current financial year. “If we are able to get through one more week with the current temperature, I think due to early sowing wheat crop will also… and we may be able to get a good crop. And it will have a positive chain Forward-looking responses to inflation, to agricultural production, to monetary policy, etc”.
With regard to the next fiscal, Nageswaran said the 6.5 per cent growth estimate has more downside risks than upside risks.
“Of course, all of this is subject to assumptions about how the world situation will look, both in politics and economics. A share of GDP, if you look at the figures for three quarters of the last five fiscal years, it has been rising,” he said .
He said that one should not be too optimistic while talking about 8-9 per cent GDP growth in the current environment. “If you can achieve 6.5-7 per cent or 6.4-7 per cent growth in the next 7-8 years till the next decade, we would have done very well”.
He said that the capital expenditure of the public sector has been increasing in the last several years and is increasing three times with focus on several sectors. Naturally at some point, public sector capex will have to take a step back and the private sector will have to step up. Nageswaran said public sector capex has created physical infrastructure for better manufacturing growth and export performance in the coming years.
The Chief Economic Adviser in the Finance Ministry also said that nominal GDP growth for the next fiscal year is assumed at 10.5 per cent, and though India remains optimistic, it is aware of the formidable challenges that face both developing and advanced economies .
“We need just 2-3 years of stable 10 per cent nominal GDP growth for fiscal parameters to show meaningful improvement. So while it is clear that the quality of expenditure is improving and there is still a There is room for improvement.” quantitative parameters, exaggerated arm twitch may not be necessary,” he said.
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