Page 3 - CII Artha Magazine 2022
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Message From Director General

                                                                            Chandrajit Banerjee, Director General, CII

        T   his is a time of exceptional     The RBI’s reassurance to remain     What is more, despite the geopolitical
            difficulty for the world economy.
                                             accommodative with a focus on calibrated
                                                                                 turbulence created by more than two
        The ongoing Russia-Ukraine conflict and   withdrawal is encouraging.     months of war, many of our economic
        consequent economic sanctions, US Fed   The spiraling inflation and attendant   indicators are flashing green. The core
        monetary tightening and the pandemic   uncertainty could have a negative impact   sector has registered a strong sequential
        shocks from China have reignited     on consumption demand, which has    growth; the manufacturing and services
        uncertainties across the globe. The   barely managed to return to a little above   PMI are on the upward trajectory and
        economic spillover effects are being felt   the pre-pandemic level in the last quarter.   exports are on the ascendent. Meanwhile,
        worldwide. And India is no exception.                                    GST collections have hit a fresh high in
                                             And a revival of consumption demand is
        Indeed, the Indian economy, which has   crucial for investment-led economic   April as economic activity is expanding
        barely begun the recovery journey from   recovery. Moreover, fiscal pressures and a   and even private investments, which have
        the multiple pandemic shocks, is now   widening current account deficit (CAD),   so far been elusive, have started showing
        finding the macro-economic           triggered by the external conflict, will   early signs of a pick-up.
        environment a lot more daunting. The   impact India's growth in the financial year   Hence, despite the economic
        most significant challenge is in terms of   that has just begun.         uncertainties caused by war and its
        elevated oil, metal and commodity    The war has also created some positives   impact on supply chains, our
        prices which are aggravating supply   which bode well for the country.  For   macroeconomic indicators remain fairly
        shocks to the economy and threatening   instance, while inflation is straining   strong. Going forward, the economy may
        macro-economic stability. With nearly   household budgets, a spike in farmgate   suffer a moderate slowdown, but certainly
        80 per cent of our crude oil needs   prices is raising rural incomes. Hence, a   not a dramatic fall in growth. India would
        being met through imports, the       part of the inflationary impact is fueling   continue to remain the fastest growing
        reverberations are being felt through   consumption and investment in the   economy in the world.  And in times to
        higher inflation, widening trade deficit,   hinterland. Besides, the conflict has created   come, backed by conducive policies and
        and weakening rupee.                                                     reform initiatives, it would take a lead in
                                             an unlikely export opportunity for India in
        With inflation remaining above the RBI’s   items such as wheat and corn as well as in   shaping global growth.
        tolerance level, the RBI has stepped in   processed food, steel, pharma etc.
        and raised repo rate by 40 basis points.   Further, Ukraine and Eastern Europe
        As a result, the pandemic induced cut in   were lately providing tech talent pool to
        policy support effected in 2020 has now   the West. Now demand for Indian IT
        been withdrawn.  It has also hiked the   talent could rise. Several European
        cash reserve ratio to withdraw liquidity.   nations are also experiencing a shortage
        With major central banks including the   of skilled personal, engineers and doctors.
        US Federal Reserve continuing their   India, with its huge reservoir of skilled   Chandrajit Banerjee
        journey of monetary policy normalisation,   manpower, could well fill in the gap.   Director General, CII
        a rate hike by the RBI had been expected.

                                                                                      ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY  03
                                                                                           QUARTERLY JOURNAL OF ECONOMICS
                                                                                                        MAY 2022
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