G20 not alarmed by banking crises: Chief economic advisor V Anantha Nageswaran – Times of India
CHENNAI: G20 countries have expressed sentiments that the current banking turmoil need not lead to a systemic crisis, while several nations felt that inflation is stickier, said chief economic advisor V Anantha Nageswaran and co-chair of Second G20 Framework Working Group (FWG) meeting. In an interview in Chennai on Friday, he told TOI that there is no need to revise India’s 6.5% GDP growth projection in FY24. Excerpts from his interview:
Q: Was there any discussion today on the current banking turmoil?
A: Most countries naturally feel that the situation that arose with the institutions in Europe and specific institutions had specific reasons and therefore the participants from those countries do not think that there is a need for a widespread concern. They feel that policy makers have things under control and they are responding. Of course, they said, there is a need to remain vigilant and strengthen risk management. Naturally, the current prevailing sentiment is that it need not lead to a systemic crisis.
Q: What were the key areas of deliberations on the first day of G20 framework working group in Chennai?
A: Several countries feel that inflation is stickier and coming down more slowly than they would like to. Most countries reiterated that they would remain on track with their monetary tightening. They also feel that financial stability risks can be handled and that need not come in the way of further interest rate increases in their countries. IMF in its presentation at our request – India G20 presidency, included some important information on the availability of critical minerals and rare earths such as copper, cobalt and lithium will be needed if we have to switch to renewable energy. We know that production of these minerals is concentrated in a few countries and processing is also concentrated in few countries, predominantly China. But the demand is going to come from the entire world. There is lot riding on this. Ensuring their adequate availability for all the countries for the next 20-30 years and developing technologies to minimise the dependence on these minerals, recycling and making the technologies commercially viable and shared with all the countries are very important, if the world as a whole has to succeed in tackling climate change.
Q: What are the positives that were discussed?
A: In the global economy, the positives, they feel commodity – food and prices have come down. The economic activity in several countries has picked up in the last few months. They feel that China’s reopening has gone off relatively smoothly, which is both a positive and some concern that the reopening may also lead to higher demand for commodities down the road.
Q: How Indian banks are remaining strong and resilient in the context of some U.S. regional banks collapsing and Federal Reserve hiking 25bps?
A: The Indian central bank and the governor have said very clearly that our banks are safe, resilient and stable. Our good luck is that we went through the financial cycle last decade. We have invested a lot of time and effort in strengthening the bank balance sheets and looking at their risk parametres. In that sense, the memories are still fresh. We haven’t forgotten the lessons of the last financial cycle. It also gives an additional layer of protection.
Q: Amid the Ukraine-Russia war, which is having an impact on the energy supply crisis and U.S. is probably headed for a recession, will India be able to sustain the projected GDP of 7% in the current fiscal? What would be the GDP projected for FY24?
A: For FY24, the economic survey has made a projection of 6.5%. RBI came out with a projection of 6.4% and the IMF in January said it will be 6.1%. But we also said in the economic survey that the 6.5% is our baseline number. We said the range is from 6 to 6.8%, which means we were signaling that the downside risk to 6.5% is higher than the upside to 6.5%. We stand by that and do not see any reason to revise it at this point.
Q: How would the Indian economy to perform in FY24? Industries/Sectors that could be affected by impending global recession?
A: Difficult to talk about the sectors to be hit because we have not changed our outlook of 6.5%. If there is a big financial crisis globally, similar to the one that happened in 2008, which we are not predicting at the moment at all to be very clear. If there is one, there will be naturally huge amounts of interbank financing flows, it could affect technology funding, startups and it will have a general impact on the economic growth as it had in 2008-09. But that is not our baseline scenario at this point. We think our recovery will continue.
Q: Was there any discussion today on the current banking turmoil?
A: Most countries naturally feel that the situation that arose with the institutions in Europe and specific institutions had specific reasons and therefore the participants from those countries do not think that there is a need for a widespread concern. They feel that policy makers have things under control and they are responding. Of course, they said, there is a need to remain vigilant and strengthen risk management. Naturally, the current prevailing sentiment is that it need not lead to a systemic crisis.
Q: What were the key areas of deliberations on the first day of G20 framework working group in Chennai?
A: Several countries feel that inflation is stickier and coming down more slowly than they would like to. Most countries reiterated that they would remain on track with their monetary tightening. They also feel that financial stability risks can be handled and that need not come in the way of further interest rate increases in their countries. IMF in its presentation at our request – India G20 presidency, included some important information on the availability of critical minerals and rare earths such as copper, cobalt and lithium will be needed if we have to switch to renewable energy. We know that production of these minerals is concentrated in a few countries and processing is also concentrated in few countries, predominantly China. But the demand is going to come from the entire world. There is lot riding on this. Ensuring their adequate availability for all the countries for the next 20-30 years and developing technologies to minimise the dependence on these minerals, recycling and making the technologies commercially viable and shared with all the countries are very important, if the world as a whole has to succeed in tackling climate change.
Q: What are the positives that were discussed?
A: In the global economy, the positives, they feel commodity – food and prices have come down. The economic activity in several countries has picked up in the last few months. They feel that China’s reopening has gone off relatively smoothly, which is both a positive and some concern that the reopening may also lead to higher demand for commodities down the road.
Q: How Indian banks are remaining strong and resilient in the context of some U.S. regional banks collapsing and Federal Reserve hiking 25bps?
A: The Indian central bank and the governor have said very clearly that our banks are safe, resilient and stable. Our good luck is that we went through the financial cycle last decade. We have invested a lot of time and effort in strengthening the bank balance sheets and looking at their risk parametres. In that sense, the memories are still fresh. We haven’t forgotten the lessons of the last financial cycle. It also gives an additional layer of protection.
Q: Amid the Ukraine-Russia war, which is having an impact on the energy supply crisis and U.S. is probably headed for a recession, will India be able to sustain the projected GDP of 7% in the current fiscal? What would be the GDP projected for FY24?
A: For FY24, the economic survey has made a projection of 6.5%. RBI came out with a projection of 6.4% and the IMF in January said it will be 6.1%. But we also said in the economic survey that the 6.5% is our baseline number. We said the range is from 6 to 6.8%, which means we were signaling that the downside risk to 6.5% is higher than the upside to 6.5%. We stand by that and do not see any reason to revise it at this point.
Q: How would the Indian economy to perform in FY24? Industries/Sectors that could be affected by impending global recession?
A: Difficult to talk about the sectors to be hit because we have not changed our outlook of 6.5%. If there is a big financial crisis globally, similar to the one that happened in 2008, which we are not predicting at the moment at all to be very clear. If there is one, there will be naturally huge amounts of interbank financing flows, it could affect technology funding, startups and it will have a general impact on the economic growth as it had in 2008-09. But that is not our baseline scenario at this point. We think our recovery will continue.
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