At a time when the Centre is stressing on the need for self-sufficiency by pushing the narrative of Aatma Nirhar Bharat, International Monetary Fund (IMF) chief economist Gita Gopinath on Thursday said the country needs to be in integration with global supply chains for holistic development.
"Many nations are reassessing benefits of globalisation. For holistic development, India cannot shy away from integration in global supply chain," she said in an interview with CNBC-TV18.
Gopinath mentioned that in India, support in terms of monetary and fiscal policy and financial support has been substantial.
"Off-budget spending has been a lot more in India compared to on-budget spending. There is fiscal space for India to do more to help MSMEs, the poor and vulnerable population," she said.
The veteran economist also pointed out that India’s lockdown period had lasted longer that IMF's anticipation in April.
"India’s health crisis has not abated yet and spread continues despite efforts," she said.
She said that India had structural vulnerabilities in the financial system even before the pandemic started.
"Financial vulnerabilities may rise if NPAs rise in financial space due to coronavirus and lockdown," she said.
Gopinath said interest rates are down around the world and that the government can borrow cheaply as compared with a few months earlier.
Talking about the labour sector in India, she said, "Trade disruptions can become a big downside risk. A good system of local authorities and communities can be used to support informal workforce. Formalisation of labour force will have to be accelerated to get growth back. Labour force reforms will have to be multi-dimensional. Better working conditions and more formalisation of workforce are important if India wants to be a manufacturing hub."
Gopinath predicted India's consolidated deficit at 12% this year.