CEA Krishnamurthy Subramanian says need to focus on meaningful employment; there is misinformation regarding jobs data
Subramanian said that the gross capital formation has now picked up adding that an effect of investment on growth is often felt with a lag
Chief Economic Adviser (CEA) Krishnamurthy Subramanian on Friday said that there has been some slowdown in the economy over the last two quarters.
Subramanian attributed the slowdown in the Indian economy to two factors. The first reason, he said, is a hangover of what happened in the economy in previous quarters and the second is general elections. "Historically, the economy gets into wait and watch mode ahead of elections. Election season adds to the uncertainty," Subramanian said in an interview with CNBC-TV18.
In a CNBC-TV18 Exclusive Krishnamurthy Subramanian, Chief Economic Adviser helps decode the Indian Macro picture https://t.co/Cb6EUdzaSs
— CNBC-TV18 News (@CNBCTV18News) April 26, 2019
He said that the gross capital formation has now picked up adding that an effect of investment on growth is often felt with a lag. "The effects of the decline in the investment have now started to show up," the Chief Economic Advisor said. He added that overcapacity led to a slowdown in investments.
Subramanian said that demand for investments from corporates is yet to pick up. Responding to the questions on whether the slowdown will continue in FY20, he said that the growth estimates will come down by a few basis points. "My own estimate is we should be above 7 percent. It will be over-optimistic to expect the growth to touch 7.5 percent. I wouldn't be worried about direct tax collection numbers. In terms of indirect tax collection, there has been a shortfall of around Rs 1 lakh crore. That is something which has pulled us back. We need to work on that as we go forward," the CEA said.
He said that direct tax collection from April-February was at 8.35 lakh crore, up 15 percent YoY and added that indirect tax collection from April-February was at Rs 8.5 lakh crore, up 3 percent YoY. Subramanian said that shortfall in indirect taxes limited GDP growth in FY19.
Talking about the fiscal deficit, the chief economic advisor said that he expects it to be around at 3.4-3.5 percent for this year. For the next year as well the fiscal deficit will be around 3.4 percent, he said.
Subramanian said that non-banking financial institutions' (NBFCs) situation is now better than what it was. He said that some NBFCs are facing difficulty and added that the government is monitoring the situation closely. The government will take steps if and when required, the CEA said.
Commenting on the Insolvency and Bankruptcy Code (IBC), the CEA said it is bringing in structural behavioural change. "Reserve Bank of India's (RBI) 12 February circular was a technical judgement. It does not really change RBI’s mandate," Subramanian said.
Commenting on the wrangling over jobs data, the CEA said that there is some misinformation on the unemployment front. "Earlier we used to have the employment and unemployment survey. Now we have periodic labour force survey. One of the key things a lot of people are not taking cognisance of is that the sampling criteria in these two surveys are very different. In the Indian context, we need to be concerned about meaningful employment. When we talk about jobs, we always focus on the supply side, but the demand side is equally important," Subramanian said.
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