The Conversation: BIBEK DEBROY, CHAIRMAN, ECONOMIC ADVISORY COUNCIL TO THE PRIME MINISTER

BIBEK DEBROY, CHAIRMAN OF ECONOMIC ADVISORY COUNCIL TO THE PRIME MINISTER (EAC-PM), BELIEVES BUDGET 2023 IS EXTREMELY IMPORTANT TO ARTICULATE THE CENTRAL GOVERNMENT'S MEDIUM-TERM PLAN TO PUSH ECONOMIC GROWTH AMID GLOBAL UNCERTAINTIES. AFTER ALL, IT'S THE LAST BUDGET BEFORE GENERAL ELECTIONS IN 2024. THE EMINENT ECONOMIST EXPLAINS THE THINKING WITHIN EAC-PM, SUGGESTS WHICH ECONOMIC ENGINES INDIA CAN BANK ON AND DIVES RIGHT INTO THE RAGING DEBATE OVER 'FREEBIES' OFFERED BY POLITICAL PARTIES TO WOO VOTERS.

- JOE C. MATHEW

ECONOMIC HEADWINDS

What is the thinking in EAC-PM about the impact of a global downturn on India?

Firstly, to state the obvious, compared to many countries, India is in a safe position. However, it is not an insulated country, so whatever is happening globally, whether on economic or geopolitical front, will affect both the real sector and the financial sector. Part of the impact will be direct and part (due to) volatility it causes. At EAC-PM, we think Indian economy will do 7-7.5% GDP growth. That's the ball park. Is that enough? No.

It is estimated that 8-8.5% growth is needed to achieve the $5 trillion GDP target by FY27. Is that unlikely now?

Given what is happening globally, there is no chance of 8-8.5% growth. There is an issue with prices of oil or energy in general. And energy is something we cannot diversify over-night. We can have a transition over a period. The impact of current levels of oil prices on balance of payments is not that serious. We have enough (forex) reserves to handle it. However, it is showing in high consumer prices. That becomes partly a political issue.

Going back to economy, there is growth, and there is inflation. Inflation is clearly going to be higher than what one might have hoped. Higher does not mean alarmingly high. This kind of imported inflation is not amenable to monetary policy (interventions). I am not talking about food inflation, which is a periodic thing that will pass. So, we are in for a slightly higher rate of inflation.