CEA bats for autonomy of policy to boost growth

Chandigarh/New Delhi, Sept 2

Retaining policy autonomy and creating space to insulate our economy from the volatility of global capital flows is critical at a time when global capital flows have remained robust while trade globalisation has slowed down, said Dr V Anantha Nageswaran, Chief Economic Advisor to the Centre Government.

He was speaking at the inaugural session on “Is India’s financial sector geared up to support our country’s sustained double-digit growth?” at Financing 3.0 Summit of the Confederation of Indian Industry (CII) in Mumbai today.

“With a modest current account deficit, India relies on global capital flows, but India has one of the brightest global economic growth prospects. It is up to us to sustain this momentum and use it to our advantage in carving out policy space for ourselves,” he said.

Nageswaran said the phenomenon of financialisation, characterised by a high level of market capitalization relative to GDP, leads to a disproportionate focus on market expectations and trends which can distort macroeconomic outcomes and policy discourse.

“As India looks ahead to 2047 with optimism and hope, this is what we must avoid because the consequences of such financialisation are evident in many advanced economies, including unprecedented levels of public and private debt, economic growth increasingly dependent on continued asset price inflation, and a massive surge in inequality,” he said.

India must steer clear of these outcomes to ensure sustainable and inclusive growth, he added.