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Former Vice Chairman of NITI Aayog, Arvind Panagariya is of the view that there is no cause for concern over the current account deficit of the Indian Economy. In an exclusive interview with The Quint’s Editorial Director Sanjay Pugalia, Panagariya spoke at length about issues like increase in banking NPAs (non performing assets), the situation of Indian economy, economic reforms and US-China trade war. However, he refused to speak on the ongoing tussle between RBI and Modi government.
‘Current Account Deficit Isn’t Cause for Concern’
Panagariya argued that the current account deficit of the Indian economy isn’t a cause for concern because it’s being analysed on a monthly basis. If considered on a yearly basis, the current account deficit is not in bad shape, he said.
Due to the depreciation of Rupee, the situation seems to be worse than it actually is.
On the tariffs being imposed by the government in certain sectors, Panagariya argued that this does not mean that Indian economy has become conservative or the government has become protectionist. He said that despite tariffs, Indian economy is pretty liberal.
Panagariya further added that at one point, this country had tariffs as high as 355 percent. “We have successfully brought it down to 10 percent which is a massive achievement. We think that imposing tariffs in a particular sector would increase the output of that sector. This approach isn’t good for our economy,” he said.
‘India Should Cash In on US-China Trade War’
Panagariya stated that the trade war between the USA and China can go on for a long period of time. This is so because there is a general consensus in USA against the economic policies adopted by China.
China has not fulfilled the promises it made in World Trade Organisation (WTO) which has further angered the US. The trade war against China will not just be limited to President Trump. A future US President may also adopt anti-China economic policies, Panagariya added.
But India should cash in on this situation. Due to restrictions imposed by the trade war, a lot of companies who had their bases in China or US will be seeking a new production base. They would want to shift their production units. We should try to woo them to our country. This will be a huge benefit of our economy because multi-national companies usually work on large scale projects. They also have access to technology and possess better market specialisation which will be of immense help to us.
‘Reforms in Civil Services and Judiciary Important’
When asked about the key reforms being pushed in the country, Panagariya said that the banks must be privatised. A major step would be reforms in civil services. The prime minister took a major step in this direction when he introduced the ‘lateral entry’ system.
He also advocated for judicial reforms but added that over-regulation has been a problem in India.
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