Global crisis over, farm new worry: Arvind Virmani
The Economic Times, November 3, 2009, Page 9
Dheeraj Tiwari, ET Bureau
The past two years have been a roller-coaster ride for chief economic advisor Arvind Virmani. He has seen double-digit growth, and also tackled the world’s worst economic crisis for decades. Before joining as India’s representative at the International Monetary Fund (IMF), he told ET that the global financial crisis is over and the economy is back on track. Excerpts:
How you do you assess the current economic scenario?
Clearly, the global financial crisis is over and so one need not worry about impact of other negative developments in the global economy on India. The situation has changed and now one can get away from this issue of financial stability which was there till March-April. The new element now is supply side and pressure from agriculture sector.
What are the indications that the crisis is over?
Well, the simplest one is change in discussion. At the global level, too, no one is now talking about slipping into a great depression. Also, other indicators such as recovery of the organized sector reflected in IIP numbers and stock market. The requirement for outside funding has gone down. The investment recovery will be slow but the indications are there.
So you are positive on the growth rate which you projected in the economic survey?
Yes, I am. Since March I’ve been saying that we are expecting a U-shaped recovery. Average growth for the full year will be around 7%. If you want the monsoon adjustment, one would reduce it by 0.5%. Besides, global situation is much better than it was in March. The industrial production figures and the stock market recovery makes this assumption more firm.
So is it the right time to work out an exit policy?
Exit policy can be very confusing. We’ve suggested that WPI inflation will rise and it’s not a surprise. As of now RBI decision to not change interest rates, I agree with that completely. Also, it’s not a question of exit strategy. These were special financial arrangements done for tackling the crisis and when they’re over, they’ll be withdrawn. They are for specific period and there is no reason to withdraw them sooner or later.
How about the rising fiscal deficit and can disinvestment be used as tool to counter that?
Fiscal deficit will be brought down as it has been mentioned in the budget. There is a path laid down. As far as disinvestment is concerned, the policy is very clear that it will proceed. Disinvestment is by each department, so by definition it has to be one by one and hence a roadmap cannot be formulated.
Is Dual listing an issue, which now needs to be looked into?
Dual Listing is an issue. It is important to set up a process to see what policy we should have for next 6-12 months from now. So there should be deliberation that next time we are ready. You have to also take in account other emerging countries. Tomorrow there will mergers in East Asia, South Asia and we should have a reasonable policy.
How about energy issues, you have raised this concern time and again?
Yes. Look the oil prices would eventually rise. There is a window of opportunity we’ve perhaps for next 18-months to get the policy regarding petrol and diesel prices. I believe a task force has already been appointed and which will give its recommendations soon.
How has been your stint in the finance ministry and any piece of advice for your successor?
My stint in the finance ministry started with '91 reforms and it has ended with three big challenges. It has been a very satisfactory journey. The challenge is to come out with policy which is sound and practical. As far as the nugget of advice, very simple basic experience is that if you want to be effective, you’ve to be patient.
The Economic Times, November 3, 2009, Page 9
Dheeraj Tiwari, ET Bureau
The past two years have been a roller-coaster ride for chief economic advisor Arvind Virmani. He has seen double-digit growth, and also tackled the world’s worst economic crisis for decades. Before joining as India’s representative at the International Monetary Fund (IMF), he told ET that the global financial crisis is over and the economy is back on track. Excerpts:
How you do you assess the current economic scenario?
Clearly, the global financial crisis is over and so one need not worry about impact of other negative developments in the global economy on India. The situation has changed and now one can get away from this issue of financial stability which was there till March-April. The new element now is supply side and pressure from agriculture sector.
What are the indications that the crisis is over?
Well, the simplest one is change in discussion. At the global level, too, no one is now talking about slipping into a great depression. Also, other indicators such as recovery of the organized sector reflected in IIP numbers and stock market. The requirement for outside funding has gone down. The investment recovery will be slow but the indications are there.
So you are positive on the growth rate which you projected in the economic survey?
Yes, I am. Since March I’ve been saying that we are expecting a U-shaped recovery. Average growth for the full year will be around 7%. If you want the monsoon adjustment, one would reduce it by 0.5%. Besides, global situation is much better than it was in March. The industrial production figures and the stock market recovery makes this assumption more firm.
So is it the right time to work out an exit policy?
Exit policy can be very confusing. We’ve suggested that WPI inflation will rise and it’s not a surprise. As of now RBI decision to not change interest rates, I agree with that completely. Also, it’s not a question of exit strategy. These were special financial arrangements done for tackling the crisis and when they’re over, they’ll be withdrawn. They are for specific period and there is no reason to withdraw them sooner or later.
How about the rising fiscal deficit and can disinvestment be used as tool to counter that?
Fiscal deficit will be brought down as it has been mentioned in the budget. There is a path laid down. As far as disinvestment is concerned, the policy is very clear that it will proceed. Disinvestment is by each department, so by definition it has to be one by one and hence a roadmap cannot be formulated.
Is Dual listing an issue, which now needs to be looked into?
Dual Listing is an issue. It is important to set up a process to see what policy we should have for next 6-12 months from now. So there should be deliberation that next time we are ready. You have to also take in account other emerging countries. Tomorrow there will mergers in East Asia, South Asia and we should have a reasonable policy.
How about energy issues, you have raised this concern time and again?
Yes. Look the oil prices would eventually rise. There is a window of opportunity we’ve perhaps for next 18-months to get the policy regarding petrol and diesel prices. I believe a task force has already been appointed and which will give its recommendations soon.
How has been your stint in the finance ministry and any piece of advice for your successor?
My stint in the finance ministry started with '91 reforms and it has ended with three big challenges. It has been a very satisfactory journey. The challenge is to come out with policy which is sound and practical. As far as the nugget of advice, very simple basic experience is that if you want to be effective, you’ve to be patient.
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