More optimistic on growth than before: MPC member
Varma further said that India should be willing to accept inflation between 4 per cent and 5 per cent for several quarters as the price of avoiding a growth shock.
RBI MPC member Jayanth R Varma
NEW DELHI: RBI MPC member Jayanth R Varma said he is ‘little more’ optimistic about India’s economic growth than a few months ago, though concerns remain as the country is now ‘disproportionately’ dependent on household spending with other components of demand encountering headwinds.
Varma further said that India should be willing to accept inflation between 4 per cent and 5 per cent for several quarters as the price of avoiding a growth shock.
“I am a little more optimistic about growth than I was 2-4 months ago. My cautious optimism stems from improved consumer confidence and various indicators that point to the continuation of the growth momentum,” he told PTI in a telephonic interview.
While keeping the global growth projection for FY24 unchanged at 3 per cent, the International Monetary Fund (IMF) recently revised its growth projection for India upwards by 20 basis points to 6.3 per cent in October.
“However, the outlook remains fragile because demand is now disproportionately dependent on household spending with other components of demand encountering headwinds,” the eminent economist emphasised.
Explaining further, the Monetary Policy Committee (MPC) member said while external demand is weak due to the sluggishness in the world economy, the revival in private capital expenditure is still too tentative and muted. “Fiscal consolidation amounts to a withdrawal of the pandemic era government spending stimulus,” Varma, currently a professor at the Indian Institute of Management, Ahmedabad noted.
India’s GDP growth in 2022-23 was 7.2 per cent, lower than 9.1 per cent in 2021-22. According to the Reserve Bank of India’s projections, India’s GDP is likely to grow at 6.5 per cent in the current fiscal year.
Asked when inflation will fall back to the RBI’s target of 4 per cent, Varma said August inflation was high, but September inflation is within the band and October inflation is also expected to be low. Pointing out that India has been experiencing a lot of volatility in commodity and food prices over the last couple of years, he said in this context, a sharp rise or drop in inflation in one or two months does not mean anything.
