Dipak Dasgupta, principal economic adviser to the ministry of finance, feels that there is no cause for concern even as most agencies have lowered India's growth projections. Speaking to Arnab Mitra and Mahua Venkatesh, Dasgupta pointed out that a host of reform measures that have been undertaken in the past few months would bear fruit soon. Dasgupta, before joining the finance ministry worked at the World Bank. Excerpts:
Why is business sentiment at such a low point? Is the uncertainty due to the fact that general elections are approaching?
Confidence is a funny business and so is sentiment. It does not get impacted because the government did not announce big-bang reforms. Nobody can say why confidence is not building up. Fundamentally, there is nothing wrong with the economy. But yes, elections in general do cause a sense of uncertainty.
What can be done to revive the economy?
We follow global trends. The recovery in Europe is the most important for us because it is connected to private capital flows. When the US grows, it is good for us but at the same time, investments could also flow back into that country. I am more keen to see what happens in Europe.
The rupee has devalued significantly and despite several measures taken by the government and the Reserve Bank of India. What should be done?
Stability of exchange rate is very important and it should happen soon. Several measures have already been taken and we would see stabilisation of the rupee.
How is the government confident that growth rate in second half would pick up, especially after 4.4% growth in the first quarter?
We have had a very good monsoon and that should give us a huge boost. This would ease inflation, after which interest rates would fall. In addition, the global economy is showing signs of revival and that is also good news. Our exports have also been encouraging. We have been overplaying the negatives but the challenge is to do things consistently.
There is a view that India should keep the option of IMF line of credit open. What is your view?
The question does not arise. The economic situation is very different today from what it was in the 1990s. We have foreign exchange reserves of over $275 billion today and like I said earlier, fundamentally our economy is going strong.