‘Economy has recovered ‘handsomely’ from pandemic-hit disruptions’

Panagariya suggested the government must now signal its intention to wind down fiscal deficit by cutting it by half-to-one percentage point in 2022-23. “The Indian economy has recovered handsomely, returning to its pre-COVID GDP… Only private consumption is still below its pre-COVID-19 level,” the eminent economist said.

While an advanced estimate by the Ministry of Statistics & Programme Implementation (MoSPI) places India’s GDP growth in 2021-22, at 9.2 per cent, Panagariya said this is higher than any other country this past year and the recovery has also been across-the-board. The economy, which was significantly hit by the pandemic, had contracted 7.3 per cent in the last fiscal.

Panagariya noted the dominant view among epidemiologists now is that with a large proportion of the population now having antibodies due to past infections from different variants of the virus or vaccination, there is now a high chance that the epidemic is about to enter the endemic phase. “If this indeed comes to pass, I expect the recovery to sustain and the 7 to 8 per cent growth to be restored,” Panagariya said.

Panagariya suggested the government must now signal its intention to wind down fiscal deficit by cutting it by half-to-one percentage point in 2022-23. “We should not live beyond our means since it imposes a larger debt burden on the next generation,” said Panagariya, who is currently a Professor of Economics at the Columbia University.

To a question on cryptocurrencies, he said the Centre never succeeded in controlling Hawala transactions and “the same is going to be true of cryptocurrencies even if we ban them. So, a prudent course of action is to regulate rather than ban them,” he suggested. On rising inflationary trends, he observed inflation is a concern in the US, where it has reached 7 per cent, the highest in the last 40 years, but not in India. “In India, it has remained within the target range of 2 to 6 per cent,” he pointed out. Retail inflation in India rose to 5.59 per cent in December 2021.