EXCLUSIVE: Montek Singh Ahluwalia on the state of Indian economy

Montek Singh Ahluwalia on state of Indian Economy 

New Delhi: Giving his expert analysis, former Vice-Chairperson of the Planning Commission, Montek Singh Ahluwalia spoke to Mirror Now about the current state of the Indian economy. He said the economy has bounced back from the big downside it experienced during the pandemic but the bounce back is not even, some sectors have done quite well while some remain badly hurt so.

Speaking on the growth rate he said, “I don’t think the growth rate in the current year is any indication of what the growth rate will be going forward because before the pandemic we had slowed down. If we view what has happened in the last twelve months, as kind of getting back to the kind of GDP we had in 2019-20, then the question that you ask when you move forward is are we going to resume the growth rate that we had two years before the pandemic in which case it will be only 5 percent or can we do better.”

Talking of the recovery of the world economy, Mr. Ahluwalia said that the difference is we cannot say if the world economy is a lot better than it was before the pandemic. There is a big question mark and a lot of uncertainties. We are not going to get a tailwind from global growth. So, it has to be something we do ourselves to expand our growth potential. And, that’s the whole agenda of policy.

Mr. Ahluwalia also spoke about what he thought of the budget and the recently launched PM Gati Shakti program and its implementation. He said, “I get the thrust towards getting the public sector to do a lot of infrastructure investment, that’s a good thing. The problem is that most of this thrust comes from giving additional long-term loans to the states for them to move ahead as a part of the Gati Shakti program. This runs into the question, will states pick those projects? Will they say this is unreasonable conditionality? Some of the states have criticized the one lakh crore provision of funds on the grounds that it comes with conditionality which they say they don’t like. This one lakh crore implementation depends on state governments, not the centre.”

Speaking about the K-shaped recovery, he said that certain sectors such as pharmaceuticals, healthcare services, digital services, some exports have done well. But, on the other hand, the regular manufacturers they may not have done that well. And, what is seen in many firms is that revenue hasn’t grown that much but profits have grown. He said that the information he has suggests that the informal sector is badly hit. It may not have recovered to the 2019-20 level. For some people, the situation is better than 2019-20 but for others, it's worse, and that’s the K-shape.

He explained that the problem is not unique to India, virtually every country is experiencing the same kind of K-shape problem. But, it does not mean there will be a permanent sort of increase in inequality of the kind we have experienced in the current year.

Mr. Ahluwalia also spoke about the job market, he said that the quality of employment was not improving even when there was a rise in employment. Even the formal sector which absorbs more labour, did it in an informal, contractual area and not regular labour and this is a problem that has got intensified and if growth is low that problem will intensify. He said that India needs to grow close to 8% per annum.

To watch the whole interview, click below: