Energy Security Crucial To Sustaining India's Growth Rate, Says Chief Economic Advisor
Nageswaran emphasised that funding for fossil fuels must continue even as India strives towards a balance of renewables in the energy mix.
Energy Security and use of fossil fuels will be crucial to sustain India's growth rate, said Chief Economic Advisor (CEA) V Anantha Nageswaran at the CII annual general meeting held on Thursday (25 May).
Addressing the event, Nageswaran highlighted the significance of energy in driving economic growth. He pointed out that energy security, which is becoming a major concern due to geopolitical factors and climate change, is essential for sustaining the growth rate achieved by India in the past few years.
In his view, it is the single most important worry for India's growth in the future. He further advised financial institutions to consider the environmental costs of green projects and avoid "green washing" — which refers to projects that appear green but have unintended environmental damage.
According to him, to prolong India's financial cycle which has just begun, the financial sector must invest in digital transformation, not only for financial inclusion but also credit assessment and judgement.
The CEA also said that to maintain a sustainable financial cycle, it is crucial to retain the lessons learned from the previous cycle. This is where investments in technology, skill sets, and capabilities come into play. By doing so, he believes, credit judgement can be carried out with more scrutiny, accuracy and realism, ensuring that the same mistakes do not repeat themselves.
The CEA stated that he does not expect the US Federal Reserve to tighten liquidity any further. He also said that it is is most likely that an agreement between the US Congress and President Joe Biden to raise the national debt ceiling to ₹35 trillion will be reached before 1 June, failing which could otherwise result in a debt default.
Nageswaran emphasised the importance of privatization and monetization in improving asset efficiency. Despite potential setbacks caused by lengthy processes or stakeholder litigation, maintaining progress in privatization remains crucial.
Responding to a question, he added that public sector banks are being capitalised and in good shape, increasing their value. He emphasized that applying the methods of the private sector in the public sector would result in superior outcomes.
He further opined that India's investment cycle, be it foreign or domestic, will lead to employment generation and income growth across different income levels, which will bolster consumption growth. He anticipates sustainable consumption growth resulting from investment and income generation, without endangering external balances.
The CEA noted that the $66 billion of investments that came into various sectors in the first 11 months of FY23 is a decent performance, despite being lower than the $84 billion in FY22, which is attributed to increasing interest rates and geopolitical uncertainties.
Nonetheless, he stated, there are ways to improve the investor-state interactions, protection regimes, stability of tax policies, and infrastructure connectivity, which would attract more capital inflows to the country. The last mile connectivity and plug-and-play issues on the ground are the main focus areas of improvement.
As businesses confront uncertainties in their own countries, companies shifting to India is just the beginning of a possibly long-term trend, according to him. He believes that with time, companies' ability to focus on diversifying their supply chain and including India in the list will improve.
Speaking further, the CEA also expressed his support for the recent decision to levy TCS on foreign credit card transactions and the ₹7 lakh exemption that followed, stating that it will avoid trouble for honest citizens and taxpayers.
As you are no doubt aware, Swarajya is a media product that is directly dependent on support from its readers in the form of subscriptions. We do not have the muscle and backing of a large media conglomerate nor are we playing for the large advertisement sweep-stake.
Our business model is you and your subscription. And in challenging times like these, we need your support now more than ever.
We deliver over 10 - 15 high quality articles with expert insights and views. From 7AM in the morning to 10PM late night we operate to ensure you, the reader, get to see what is just right.
Becoming a Patron or a subscriber for as little as Rs 1200/year is the best way you can support our efforts.