Politics to shape economy in 2014: Bimal Jalan
Former Reserve Bank of India governor Bimal Jalan, in an exclusive interview with NDTV Profit, said he expects the economic growth to pick up in 2014 but a lot would depend on the outcome of the elections.
Here is the edited transcript:
Outlook for the economy in 2014:
It certainly will be better than 2013. For example the current account deficit will be lower, the inflation is likely to be lower and the GDP growth next year is expected to be higher; now that the government has taken certain measures to boost investment which will have a positive impact on economic growth as well as on infrastructure development. By and large the outlook looks very positive.
On GDP growth rate
I can't predict a rate of growth. If the world economy also recovers which was not expected 6 months ago, if the rates of growth there are positive and if our investment picks up then we can expect good growth.
But the biggest uncertainty is with regard to our electoral outlook. If you have factious government with a lot of parties, with no party enjoying a major number of seats in Parliament, then we have a major political problem, because government determines policy. Economics is not determined by itself or by the conditions on the ground but by what people expect government to do.
Let us assume that we have a stable government then in terms of economic fundamentals I believe that we can at least achieve 6 per cent rate of growth without any problem.
On whether investment cycle will see a revival
Our fundamentals in terms of savings investments have been lower than what the potential is. Then there was a lot of political uncertainty which caused investment 'wait and watch' attitude on the part of investors. So if I were to take macro-economic parameters which direct growth I have a very positive outlook for 2014. But I am extremely uncertain about the political outlook and politics will definitely determine the shape of our economy.
On Aam Admi Party
In terms of what they are saying it is very encouraging. You might say for the people of India there is a change in environment. This anti-corruption drive is a very fundamental change. And the most interesting thing is that is not group politics, it's the entire society taking part. So it's a very positive development.
Second is the delivery of services and that is where we will have to wait and watch, whether they will be able to deliver in Delhi.
On Aam Admi Party announcements
Who would not want lower prices. However, it is not what we announce but what we do that shapes the society. So we have to take a long-term view.
We are very fortunate in having a government which has support irrespective of caste, creed, religion and so on. Whatever they have said they mean it. This anti-corruption drive is very important and you can already see the changes like no red beacon car etc. Let us hope they can get a viable policy on ground which works and this may require some amount of structural change in policies.
