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Air India Divestment, GST Stabilisation, NPA Settlements Big Reforms; Rate Cut Unlikely, Hints CEA Arvind Subramanian

In a conversation with CNBC TV18's Shereen Bhan, Chief Economic Adviser (CEA) Arvind Subramanian said the government is not likely to come up with monetary easing in the recent future.

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Updated:January 31, 2018, 7:14 AM IST
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Air India Divestment, GST Stabilisation, NPA Settlements Big Reforms; Rate Cut Unlikely, Hints CEA Arvind Subramanian
File photo of Chief Economic Adviser Arvind Subramanian. (Reuters)
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New Delhi: A day after Finance Minister Arun Jaitley tabled the Economic Survey in the Parliament, the architect of the survey Chief Economic Adviser (CEA), Arvind Subramanian, in a conversation with CNBC TV18's Shereen Bhan, said the government is not likely to come up with monetary easing in the recent future.

"Relative to the last 18 months we are close to the inflation target. Case for monetary easing is less persuasive; we are close to the inflation rate," said Subramanian.

The CEA while talking about major pain points for the economy on Monday said crude oil prices have hindered growth as it has contained consumption.

Harping on the same, he said, "I had certainly thought of $55-$60 as the crude price. Crude price rise has surprised me, surprised the markets. Medium term oil price could be $60-$65, depends on the Aramco listing. Monetary policy will have to take this into account."

Crude oil prices have rallied to $70 recently.

Eight states are going to have elections this year. Commentators have alleged that government policies will be biased towards appeasing voters.

"Election year does not mean fiscal populism. I would argue for an ambitious fiscal consolidation on economic grounds. I think there's a middle ground on fiscal consolidation: yes consolidation but how much is the question. This government believes in fiscal consolidation for its own sake, not for rating agencies," said Subramanian.

Providing a guideline to the government, Subramanian said, "One very strong message I have for the coming year is there's a full policy agenda and we don’t need anything big."

"Air India divestment, GST stabilisation, NPA settlements is a very ambitious agenda," he added.

India has seen rampant farmer agitation in the country all through last year that was visible during the closely contested Gujarat elections as well.

"How do we protect the farmer on the downside. It’s a medium term challenge to boost agri productivity growth. It's a surprise that only 46% of India is irrigated. Trick is to convert distortionary supports for cereal agriculture into a Universal Basic Income for agriculture," said Subramanian batting for universal basic income again.

Talking of the goods and services tax (GST) he said, "Electricity, Petroleum, Real Estate are on the GST agenda. That doesn't preclude us from rationalising GST rates. We have made big progress on shrinking the 28% GST rate; there's scope for more. We have been able to respond to the GST challenges, iron out the glitches."
| Edited by: Bijaya Das
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