CEA says time right for lowering of rates by RBI

Chief Economic Advisor Arvind Subramanian on Friday said there is more scope of easing the monetary policy as inflation has eased.

Subramanian underscored the need to inject liquidity into Indian financial markets. Talking to reporters after the presentation of Economic Survey in Parliament, the survey’s author said that India needed to concentrate on increasing domestic demand to spur economic growth as global economy was weak.

His comments, ahead of Finance Minister Arun Jaitley’s Budget on Monday, can be seen as the direction in which the government will take its Budget this year.  Economists expect the government to increase public expenditure for igniting growth.

Subramanian said there is case for pursuing structural reforms like implementation of the Goods and Services Tax. Moreover, promoting competitive federalism will also push growth, he said, adding there are reasons to believe that good economics make good politics. However, there are some disappointments with regards to impediments in strategic disinvestment and twin balance sheet (TBS) problem.

“One of the most critical short-term challenges confronting the Indian economy is the TBS problem —- the impaired financial positions of the public sector banks and some large corporate houses —- what we have hitherto characterised as the Balance Sheet Syndrome with Indian characteristics,” he said.