There may be a current account surplus in India this current fiscal according to the Chief Economic Advisor K V Subramanian on Monday. This is due to the moderation in imports owing to the under-heated economic situation caused by the COVID-19 crisis.
He said in a virtual conference organized by CII that this problem differs from the taper tantrum phenomenon witnessed by the world which was a collective reactionary response due to which there was a spike in treasury yields in the US in 2013. This happened after investors got wind of the fact that the US Fed was stopping the Quantitative Easing (QE) program. This gave rise to very high inflation levels, almost reaching double digits in big upcoming economies.
As opposed to this, he says that the COVID-19 crisis is of a different nature-that of a crisis to demand and that the efforts taken by India were suitably crafted to deal with this crisis. Due to COVID-19, there may have been a short-term hindrance in terms of growth owing to the lockdowns but he stated that due to the government efforts, medium to long-run prospects of growth seems unaffected. He went on to say that this can be seen in the fact that this year India may be having a current account surplus. We had a nearly USD 20 billion current account surplus in Q1. Therefore, even if the subsequent quarters do not see the same level of performance, India is still likely to have a surplus of current accounts.
He stated various reforms which include Insolvency and Bankruptcy code which were geared toward the formalization of our economy. This was followed by Agriculture and Labour reforms which were long-awaited. These reforms actually change the macro configuration of the economy towards those sectors that are more employment-intensive, especially the primary and secondary sectors.
Therefore, to an extent, the COVID-19 crisis seems to be more of an under heating economic crisis as compared to the normal emerging economic crisis, which is more of the overheating type and these necessary reforms would be of immense help in the medium to a long run for the Indian economy and growth potential.
Sustained growth can only be achieved by creating jobs instead of jobless growth. Reflecting on the idea of an Aatmanirbhar Bharat, he said that self-reliance is impossible without adequate capabilities and that these capabilities seldom come out of nowhere. They have to be honed by competing with the best.