"Full Year Growth To Be In – 9 to 10% Range, Unlikely To See Positive Tick Next Quarter"
- 3 years ago
With provisional estimates of GDP for the second quarter showing economic output shrank by 7.5%, following the 23.9% contraction in the first quarter, the Indian economy shrank for a second successive quarter, marking a recession for the first time in independent India’s history.
However many economists were quick to point out that the number was much better than feared, things are looking up, economically speaking and the RBI is now projecting a GDP growth of 0.1 per cent in Q3.
In conversation with Mitali Mukherjee, Fmr Chief Economic Advisor and Former Non-Executive Chairman, Kotak Mahindra Bank Dr Shankar Acharya said he believed GDP growth for the second half the year would continue to remain in negative territory, unlike the RBI that is now projecting a GDP growth of 0.1 per cent in Q3.
Dr Acharya also said that he believed the full year growth would close around the – 9 to 10% range. However he feared growth over the medium term would bubble around the 3 – 5 % range.
The former Chief Economic Advisor said demand will be a big problem in the quarters to come even as the labour market continues to suffer. Much of the damage to the labour market, he believes happened even before the pandemic had struck.
Dr Acharya who was also Non-Executive Chairman of Kotak Mahindra Bank expressed concern around the idea of extending bank licenses to corporates. The former member of the 12th Finance Commission said there were 3 key dangers in the move ; banks may be prone to lending to riskier projects based on corporate interests ( leading to a spike in bad loans). Secondly, exiting from unprofitable projects would become a tricky affair leading to more “zombie enterprises” that could neither be shut down nor revived. Finally, extending banking licences to corporates ran the risk of greater concentration of economic power in only a handful of names, that already held much of India’s wealth and business interests.
However many economists were quick to point out that the number was much better than feared, things are looking up, economically speaking and the RBI is now projecting a GDP growth of 0.1 per cent in Q3.
In conversation with Mitali Mukherjee, Fmr Chief Economic Advisor and Former Non-Executive Chairman, Kotak Mahindra Bank Dr Shankar Acharya said he believed GDP growth for the second half the year would continue to remain in negative territory, unlike the RBI that is now projecting a GDP growth of 0.1 per cent in Q3.
Dr Acharya also said that he believed the full year growth would close around the – 9 to 10% range. However he feared growth over the medium term would bubble around the 3 – 5 % range.
The former Chief Economic Advisor said demand will be a big problem in the quarters to come even as the labour market continues to suffer. Much of the damage to the labour market, he believes happened even before the pandemic had struck.
Dr Acharya who was also Non-Executive Chairman of Kotak Mahindra Bank expressed concern around the idea of extending bank licenses to corporates. The former member of the 12th Finance Commission said there were 3 key dangers in the move ; banks may be prone to lending to riskier projects based on corporate interests ( leading to a spike in bad loans). Secondly, exiting from unprofitable projects would become a tricky affair leading to more “zombie enterprises” that could neither be shut down nor revived. Finally, extending banking licences to corporates ran the risk of greater concentration of economic power in only a handful of names, that already held much of India’s wealth and business interests.