Full-fledged economic recovery to take hold in July, says Niti Aayog VC Rajiv Kumar

Many agencies have lowered forecasts for India’s economic growth for the current financial year in view of the devastating second wave of Covid-19. A few days ago, even the Reserve Bank of India cut the country’s growth forecast steeply to 9.5 per cent. However, Niti Aayog Vice Chairman Rajiv Kumar is sanguine that growth will pick up pace from this month itself. He expects a “full-fledged” economic recovery starting July. If a third wave of the pandemic does not hit the country, Kumar also sees the current financial year ending with double digit growth. Kumar says his optimism arises from the government’s commitment to the vaccination programme, which he believes will be critical to accelerate the economy. On the issue of cutting taxes on petrol and diesel, whose prices have hit the roof, he tells DH’s Annapurna Singh that the issue of lowering fuel taxes is a complicated one as it concerns both the central and state governments.

We are hopefully at the tail-end of the second wave of Covid-19. Many believe that the economy has not suffered as much this time around as it did in the first wave. But there are certain large segments, especially the informal sector, that have suffered silently. How do you see the economy panning out here on?

As the second wave subsides, economic activity will pick up pace across the majority of states. This is already visible in major centres of economic activity such as Mumbai, Delhi NCR, Hyderabad, etc. I expect full-fledged economic recovery to take hold in July. And as happened after the first wave subsided, the strength of this economic recovery may also surprise us. Of course, it depends very much on whether or not the pandemic re-emerges and on the pace of vaccinations. Given the expected acceleration in vaccination, I am confident that the third and fourth quarters will see strong economic activity, especially in exports and infrastructure sectors, including real estate and construction.

Many rating agencies and brokerages have cut India’s growth forecast for FY22. The RBI, too, did so recently by one percentage point. What is your expectation?

Based on the above assumptions, I expect GDP in FY22 to be in double digits. You may expect the agencies which have recently lowered their estimates to revise them upwards after the festival season.

Fear of a third wave of Covid looms large. How do you see the government preparing for it? Quickening the pace of vaccination is said to be critical to economic recovery.

The pace of vaccinations is, without doubt, the single most important determinant of economic recovery. The government has already announced its new vaccination policy and measures for ensuring an adequate supply of vaccine doses. In the past, we have already achieved a high of 43 lakh vaccinations in one day. This will surely be further accelerated as states, now assured of their supply of doses, pick up the gauntlet and reach new levels of vaccination.

Does the Niti Aayog prescribe measures to cushion the impact of the pandemic on the informal sector? Many believe that the RBI has done its bit and now it is the government’s turn.

The RBI has certainly done its bit, and the monetary policy has done the heavy lifting. But it has been supported by an active fiscal policy. This is demonstrated in the high fiscal deficit for FY21 at 9.5 per cent. The Finance Minister has repeatedly assured us that the government will do whatever is required to ensure that economic activity is strengthened and the recovery as it emerges is given the necessary momentum with additional public expenditure and outlays, especially in sectors that have high employment generating potential and maximum backward and forward linkages in the economy.

During the second wave, questions were raised over the lack of a proactive role by the Niti Aayog. A BJP MP also felt that unlike the erstwhile Planning Commission, which used to chip in with significant inputs during crises, Niti Aayog’s role has been lacklustre.

This is the first time I am getting such feedback. I surely don't agree with it. I don't wish to enumerate all that NITI Aayog has contributed to the overall government efforts. Suffice it to say that we are doing the best we can and see ourselves as an integral and effective member of Team India.

Petrol and diesel prices have hit the roof and are impacting the common man. Though the rise in prices to some extent reflect the rising global crude prices, tax rates on fuel are among the highest in the world. Do you think the government needs to do something to bring down tax rates, given that inflation could rise?

As you have said, these prices depend entirely on global price trends. In the domestic economy, these are market-determined. The issue of lowering tax rates is a complicated one as it concerns both the central and state governments. Additionally, the fiscal space has to be kept in mind.