KEY HIGHLIGHTS
With many reforms being pushed at state-level and a host of "historic" reforms announced as part of Atma Nirbhar Bharat stimulus package, NITI Aayog CEO Amitabh Kant has said that rating agencies will soon realize that India is pushing for radical reforms and growth.
In an exclusive interview with Business Today, Kant said that India has seen foreign investments pouring in as the country's economic fundamentals remain strong in the long term.
"We must also recognise that several historic reforms have just been announced as well. The agriculture sector has been unshackled from the holds of APMCs and Essential Commodities Act. Commercial mining in the minerals sector has been announced. Our defence sector has also been opened up to foreign investment. We also have to recognise that many reforms are being pushed at the state level. I am sure that rating agencies will soon realise that we are pushing for radical reforms and growth," the NITI Aayog CEO said.
ALSO READ: Modi Speech at CII: Here's what PM thinks about recent govt reforms
Citing weak implementation of economic reforms since 2017, sustained loss of growth momentum and worsening government finances among key reasons, Moody's Investors Service (Moody's) last Monday cut India's sovereign rating to lowest investment grade. A rating downgrade to 'Baa3' from 'Baa2' earlier means bonds issued by the government would be considered riskier by the investors. It will also make fund-raising costlier for private companies.
India's GDP has been on a downward spiral. At 4.2 per cent, it touched an 11-year low in FY20, the lowest since 2008-09 when investments and exports plummeted. With economy now in the tight grip of coronavirus-induced lockdown, most economists have predicted GDP growth to be negative in the current fiscal.
Amitabh Kant, however, remains hopeful of India's potential to reach high growth trajectory and become a strong growth engine of the world economy. Expecting economy to bounce back from second half of the fiscal and a host of reform measures adding to the momentum, he said that signs of recovery are already visible.
The top bureaucrat said that early indications from PMI data suggest that the contractions in manufacturing and services may have bottomed out. For example, PMI Services Index fell to 5.4 in April, and was recorded at 12.6 in May.
He noted that business outlook for the year ahead remains positive as recorded by these surveys and the world economy opening up.
"If India does see a full year recession, it is likely not to be very deep and we should see the economy bounce back in the next fiscal," the NITI CEO said.
On the fiscal stimulus package announced by the government and if it addressed the immediate concerns, Kant said that Atma Nirbhar Bharat is about laying the foundations for India to compete in global markets.
ALSO READ: Moody's cuts India's sovereign rating to Baa3, maintains negative outlook
"So inherently, it is forward looking. The relief and stimulus measures announced are also part of the Atma Nirbhar Bharat Abhiyaan," he said.
Critics of the fiscal stimulus have said that it addresses the supply-side issues while the need of the hour was to boost demand. It is also being seen more as economic measures which will bear fruit in the medium and long-term, while most problems facing people and economy are short-term. Various economists, research firms and rating agencies have also said that actual size of the fiscal stimulus could be much lower than the projected Rs 21 lakh crore.
Amitabh Kant, however, said that the Atma Nirbhar Bharat stimulus package is wide ranging and growth enhancing in both the near and the short terms. He lauded government efforts to boost local manufacturing by supporting various sunrise areas such as mobile, pharmaceuticals and APIs, battery storage, electric vehicles (two and three wheelers) among others.
He noted that government had been promoting local manufacturing by announcing production-linked incentive schemes for the mobile and API sectors even prior to the COVID-19 crisis.
"The Cabinet had in March approved production-linked incentive schemes for mobiles, select electronic components, pharmaceuticals and APIs. We will push this in other sectors also," Kant said.
ALSO READ: India needs to maintain financial stability even if fiscal deficit rises, says Uday Kotak