Economy to Be Back on Track Soon: Ridham Desai Before Budget

Desai says the economy will start to recover soon and the latter half of 2019 should see significant growth.

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The Quint talked exclusively to Ridham Desai, Morgan Stanley India’s Equity Research Head before the Modi government 2.0 presents the Union Budget for the coming financial year. Desai says the economy will start to recover soon and the latter half of 2019 should see significant growth. He lists some things the government should be mindful of while presenting the Budget.

External Debt Should Remain Stable

Financial debt is proportional to the rate of inflation; the more the debt, the more the more the prices of commodities will increase. Hence, debt needs to remain stable at 3%, where it has been for the previous three years.

Desai believes the government ought to aid the underprivileged through cash transfers, which should be added to the external debt.

Direct Tax Code

Desai expressed favour for the introduction of a new direct tax code, which has been long overdue. He says if it is announced soon, it can come out in February, if not in July. The indirect tax reform has been taken care of by GST and the time has come to focus on direct tax reform.

Increase Exports

Desai says India’s export sector has been slow in the previous few years. Insofar as global exports are concerned, India’s export share has stagnated at 2%. He thinks we should enter trade pacts with other nations in order to accelerate exports, and need to focus our attention to the sector as it isn’t restricted to the Budget but encompasses overall politics.

Increase Capital Flow in the Country

Desai remarks that the flows coming into the country, as both FDI and portfolio flows, need to be accelerated. Especially portfolio flows. He believes them to be an easy way to bring in dollars. The more the dollars, the more the investments, ultimately strengthening the economy.

While talking about the state of our economy, he said growth had been slow towards the end of 2018. He posits reasons for the same:

  • Liquity in the NBFC
  • Elections
  • Recession due to low demand

According to Desai, the worst is over! The NBFC liquidity is past its lowest point and as the elections have been concluded, government expenditure should resume soon. Moreover, the RBI’s policy stance has become more accommodating. Thus, Desai thinks the economy should recover soon.

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