India’s economic growth is poised to return to boom levels but the government should move slowly in rolling back stimulus and cutting its hefty deficit, an influential official panel said yesterday.
The economy is seen growing 8.2 percent next year and at least 9 percent the year after — the rate at which it was expanding before the global financial crisis — the prime minister’s Economic Advisory Council forecast.
The estimate came in a report released a week ahead of the national budget in which the government is expected to lay out a roadmap for winding down the stimulus aimed at shielding India from the global slump that began in 2008.
Without reducing the fiscal deficit from a 16-year high of 6.8 percent, New Delhi cannot continue with “the kind of large revenue and fiscal deficits recorded in the last two years,” the council said.
But “we need to strike a balance between the need for growth and [fiscal] consolidation” and maintain “adequate stimulus,” said council head C. Rangarajan, a former Reserve Bank of India governor.
His statement echoed calls by Indian business leaders for the government to go slow in rolling back stimulus measures, arguing that economic recovery needs to be entrenched.
The government also says it needs annual growth of 9 percent to 10 percent to make a meaningful impact on India’s widespread poverty with a fast-expanding economy required to generate jobs.
The council said most of the forecast growth would be domestically driven — from billions of dollars in spending on India’s dilapidated infrastructure and personal consumption reflecting rising incomes.
It said it expected global conditions “to be somewhat better” in coming years, helping lift India’s exports after they were sideswiped by the downturn, but it cautioned the pace of recovery in advanced economies would be “subdued.”
The council stuck by an estimate that the economy would grow 7.2 percent in the current fiscal year to next month, up from 6.7 percent last year, but said the actual number figure be higher due to strong industrial output.
Rangarajan said he expected the government could reduce the fiscal deficit to 5.5 percent to 5.8 percent of GDP in the next fiscal year.
“We want fiscal consolidation,” he said. “But we really need to ensure that the impact on growth is minimized.”
Rangarajan said food-driven inflation was a serious concern but he expected prices to moderate in coming weeks as produce from India’s winter harvest hits the market.
Last month, annual inflation jumped to 8.56 percent, its highest in 14 months, driven by food inflation of 17.97 percent as a result of last year’s weak monsoon which hit crops.
The central bank says hiking benchmark borrowing rates is an ineffective tool to tackle food price inflation but adds it is on guard for any signs of economic overheating.
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his
Taiwan’s official purchasing managers’ index (PMI) last month rose 0.2 percentage points to 54.2, in a second consecutive month of expansion, thanks to front-loading demand intended to avoid potential US tariff hikes, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. While short-term demand appeared robust, uncertainties rose due to US President Donald Trump’s unpredictable trade policy, CIER president Lien Hsien-ming (連賢明) told a news conference in Taipei. Taiwan’s economy this year would be characterized by high-level fluctuations and the volatility would be wilder than most expect, Lien said Demand for electronics, particularly semiconductors, continues to benefit from US technology giants’ effort
ADVERSARIES: The new list includes 11 entities in China and one in Taiwan, which is a local branch of Chinese cloud computing firm Inspur Group The US added dozens of entities to a trade blacklist on Tuesday, the US Department of Commerce said, in part to disrupt Beijing’s artificial intelligence (AI) and advanced computing capabilities. The action affects 80 entities from countries including China, the United Arab Emirates and Iran, with the commerce department citing their “activities contrary to US national security and foreign policy.” Those added to the “entity list” are restricted from obtaining US items and technologies without government authorization. “We will not allow adversaries to exploit American technology to bolster their own militaries and threaten American lives,” US Secretary of Commerce Howard Lutnick said. The entities
Minister of Finance Chuang Tsui-yun (莊翠雲) yesterday told lawmakers that she “would not speculate,” but a “response plan” has been prepared in case Taiwan is targeted by US President Donald Trump’s reciprocal tariffs, which are to be announced on Wednesday next week. The Trump administration, including US Secretary of the Treasury Scott Bessent, has said that much of the proposed reciprocal tariffs would focus on the 15 countries that have the highest trade surpluses with the US. Bessent has referred to those countries as the “dirty 15,” but has not named them. Last year, Taiwan’s US$73.9 billion trade surplus with the US