Arvind Panagariya, Chairman of the 16th Finance Commission and former Vice Chairman of NITI Aayog, remains highly confident about the fundamental strength of the Indian economy. He believes India is well-positioned to navigate current global challenges, including the conflict in West Asia, and sustain its impressive growth trajectory.
Sustained Growth Despite Multiple Shocks
Panagariya emphasized India's consistent economic performance over the past two decades, maintaining a growth rate close to 7% in real dollar terms, even in the face of significant disruptions. He cited several major shocks since 2003-04, including the global financial crisis, the 'Fragile Five' period in 2011-13, the non-performing asset (NPA) crisis, and the COVID-19 pandemic.
"We have sustained this growth for quite a while despite several shocks... there is something fundamental which is robust about the economy. It is a matter of right policies which began after 1991."
He attributed this resilience to continuous policy reforms, some of which were once considered difficult to implement. These include transformative measures like the Insolvency and Bankruptcy Code, the Goods and Services Tax (GST), and labor law reforms. Panagariya noted that while India's reform process has been slower than some East Asian economies due to democratic processes, it has outperformed all other democracies in sustained growth.
Managing Crude Oil Prices and Trade Pacts
Addressing concerns about crude oil prices exceeding $100 per barrel, Panagariya admitted an initial expectation of a potential one-percentage-point shave off growth. However, he noted that the economy has absorbed the impact effectively, maintaining 7% plus growth. He expressed optimism that the crude oil situation is unlikely to worsen significantly, especially if the West Asia conflict does not intensify.
Regarding trade agreements, Panagariya holds high hopes for the Free Trade Agreements (FTAs) with the United Kingdom and, particularly, the European Union. He anticipates a very significant positive impact from these deals, especially the disproportionately large agreement with the EU once it is finalized. He dismissed concerns about the lack of an imminent trade pact with the United States, stating it would not adversely impact India's economic growth, merely representing a missed opportunity for further benefits rather than a disadvantage.
Current Account Deficit Under Control
Panagariya also reassured that the current account deficit (CAD) is not a major concern. He indicated that the deficit is not large enough to pose a significant problem for the economy's balance of payments or financing needs.