CEA Nageswaran Advises 'Margins Of Safety' Amid Rising Global Uncertainty, Says IMF's Global Growth Estimates Outdated

V Anantha Nageswaran, the chief economic advisor (CEA) to government of Inida, on Thursday (16 March) highlighted the increasing global uncertainty due to the banking crisis in the US.

He advised governments, businesses, and individuals to maintain "margins of safety" in their operations, including fiscal planning, corporate planning, household balance sheets, and savings accounts.

Speaking at an event organised by ratings agency Crisil, he stated that the global growth estimates provided by the International Monetary Fund (IMF) in January are now outdated.

The IMF had projected the global economy to grow at 2.9 per cent in 2023 and 3.1 per cent in 2024, reports Business Standard.

Nageswaran also expressed concern about the impact of recent developments in the US on investor confidence and bank lending growth.

He suggested that emerging economies would likely benefit from the situation, as pressure on their currencies would ease. However, he cautioned that if the Federal Reserve proceeded with its tightening programme, there might be a domino effect on other banking institutions and the overall economy.

Nageswaran acknowledged that it would be challenging to determine the net effect of these developments on countries like India.

He noted that India's GDP growth was expected to be 7 per cent in the current fiscal year.

He added that if temperatures remained in the current range for another week, the wheat harvest would likely occur, leading to positive chain reactions for inflation, agricultural output, and monetary policy.

However, he cautioned that the baseline growth projection of 6.5 per cent in the Economic Survey for FY24 had more downside risk than upside risk. He believed that one should not be overly optimistic about achieving 8-9 per cent GDP growth in the current environment.

He suggested that sustaining growth of 6.5-7 per cent in the next 7-8 years until the next decade would be a significant achievement.