No need to worry about Omicron’s economic impact for now, says Bibek Debroy

There is no need to worry about the economic impact of the new Omicron variant of the coronavirus, said the chairman of the Prime Minister’s Economic Advisory Council, Bibek Debroy. He expects the Indian economy to grow 10% in the current fiscal year and 7% in fiscal year 23 thanks to a recovery in consumption and exports.

In an interview with ET, Debroy supported a body like the Goods and Services Tax Council to advance reforms in areas such as agriculture and health that are also the domain of states and a revamp of the 7th annex of the Constitution to redefine the orientation of the Central and State regions.

Considering the vaccination levels, the impact of this new variant will not be so severe and certainly will not be across India and the medical systems were now much better prepared, Debroy said.

Over 50% of India’s adult population is now fully vaccinated. “… and so even if there are infections, there won’t be any deaths on this scale. Therefore, we shouldn’t even think about the kind of lockdown we saw in the first wave. ”

He said there were signs of a robust economic recovery.

“The real growth rate this year will be around 10%, partly due to the low base. In 2022-23 there will be a slight recovery for the contact-intensive sectors,” he said. , adding that exports had increased. reasonably well and consumer spending was showing signs of recovery. “All things considered, next year we will have a real growth rate of 7% and no less than 6.5%,” he said.

In some areas there were signs of recovery, but there was still excess capacity. “However, as demand increases and excess capacity disappears, we will also see investment pick up in the second half of calendar year 2022,” he said.

Regarding the repeal of farm laws and if this had dampened the government’s appetite to undertake costly reforms, he said there would always be an appetite. He said that in 1991 all the reforms that took place were either at the border and entirely within the purview of the Union government, or concerned the removal of industrial licenses. “Anything that encroached on states was not part of the 1991 reforms. Because they were seen as harsh, no one even bothered to touch them. At least one is starting to touch them,” he said. he said, adding that tough reforms, if they relate to factor markets (labor, land and natural resources) other than capital markets, will require a body like the GST Council.

“We need a body that will discuss all of this,” he said.

He also highlighted the need for a similar central state body for the spending side as well as deciding what things the government should spend on.

He suggested an overhaul of the 7th Annex of the Constitution, which fixes the distribution of powers and responsibilities between the center and the states.

If a program is important, it should be a 100% program, preferably for items on the union’s list, he said. “If it is on the list of states, that’s why the Finance Commission gives money to states,” he said, adding that the overhaul of the center-sponsored programs (CSS ) was on hold for a long time. CSS requires a matching grant from the states.

“It is time for us to review Annex 7 of the Constitution. The Union government cannot do it on its own. This requires a discussion between the Union and the state governments,” he said. he declares.

On cryptocurrencies, he said, he was skeptical. “The word currency is misleading. It is not meant to be a currency. It is a financial asset in which one wants to invest,” he said, adding that regulation is necessary because in the absence of regulations, people will see Blue Murder as a part of they will operate as a Ponzi scheme.

“The parliamentary committee has gathered evidence. It will be allowed in one form or another, but we cannot afford to open the door wide,” he said.

When asked if it was time for fiscal consolidation or continued stimulus in the next budget, he said consolidation was important. “Budget consolidation is important, you can’t loosen the tap unnecessarily,” Debroy said.

He said that this government, since May 2014, has not received enough credit to control inflation. “Controlling inflation is a function of your degree of budget lavishness. So there are limits to public spending,” he said. Regarding unemployment of the urban labor force, he said that there was an unemployment problem in urban India but it was temporary. “If the investment is made, the labor market will eventually recover,” he said.

Debroy added that labor laws should be employment laws, the kind of thing Bangladesh did in 2006 that runs through everything. “One part is that we look at it in silos and the other part is that there is a complete lack of correlation between education and skills.”

On the issue of India’s fall in the ranking of the World Hunger Index, he said the recent National Family Health Survey showed that on many criteria there had been improvements. , with the exception of anemia.

“We have government programs that subsidize free rice and wheat. Since if someone tells me hunger is increasing, I find it hard to accept,” he said.