A day after International Monetary Fund (IMF) predicted India as fastest growing economy, chief economist Gita Gopinath said public investment was “absolutely" important for India’s growth, as it will be a driving factor over the next few years.
Gopinath, in an exclusive interview with CNBC-TV18, said there was a case to be made for more spending in the health sector and for vulnerable populations in India. “Public investment is absolutely important for India’s growth. Public investment will be driver for growth over next few years,” she said.
The chief economist also said the manufacturing and services sectors were recovering in India. Gopinath said, “It is an incomplete recovery, but a recovery nevertheless as listed firms in India were doing better than expected,” adding, “Indian MSME sector continues to be in distress. We see grounds for more fiscal push in India.”
She praised the Air India sale and said privatisation of the debt-laden national carrier was a “big step forward”. “Air India divestment shows commitment to privatisation agenda,” she said.
The Indian economy contracted by 7.3 per cent due to Covid-19 pandemic, but it is expected to grow by 9.5 per cent in 2021 and 8.5 per cent in 2022, according to latest projections released by IMF on Tuesday.
Gopinath said there was small downgrade for the global growth projection as risk related to the pandemic continues, but number of cases have decreased.
Talking about price rise in energy sector in several parts of the world, she said energy prices were expected to come down by Q2CY22.
In the near-term, however, she warned that a spike in energy prices could lead to headline inflation. In some countries, core inflation was more subdued than headline inflation, she added.
“We had a downgrade for India in July because of a catastrophic second wave,” Gopinath said.
Talking about the downgrade in the Chinese economy’s predicted growth pattern for next year, she said the property sector was a risk factor in China’s growth.
“China has the tools to handle this in an orderly fashion. Employment numbers have been quite volatile, subject to revision,” she said.