India should focus on supply through reforms: K.V. Subramanian

The Presidential address was by Dr. Shankar Acharya, Former Chief Economic Adviser and author of An Economist at Home and Abroad.
Krishnamurthy Subramanian

New Delhi, Nov 12 : India should focus on supply through reforms and capital expenditure to create assets in the economy, said Dr. K.V. Subramanian, Chief Economic Adviser, Government of India.

He was speaking about the three decades of 1991 economic reforms at the 3rd Global Finance Conclave organised by the Jindal School of Banking & Finance (JSBF) on Friday.

Elaborating on how the economy has grown since 1991, Subramanian pointed out how the country handled the demand and supply line impact during the Covid-19 crisis.

“Recognising that the Covid pandemic requires social distancing and lockdowns, it was obvious that not only would there be a demand side impact, but disruptions of the supply line chains too. While demand can actually be pushed up faster, it takes at least eight to 10 months for supply to increase.

“What India has done during this crisis, and I hope this will become an important macro-economic template that other countries and policymakers should study in terms of the policy response, is that India actually focused on the supply side – whether it is through the reforms or the capital expenditure,” he added.

He further said: “If you have an aggregate supply line not changing — you only have increasing demand. In macroeconomic terms, it means there will be a path to growth but inflation will go up as well. When inflation goes up, monetary policy has to try and unwind that demand. What you have then is the increase in demand that the fiscal policy did and the monetary policy tries to unwind it. So, you come back to square one, that push to growth that you got is a temporary one because monetary policy and fiscal policy work at cross purposes.”

The theme for the conclave is “India’s Growth Story from 1991 To 2021, And Beyond” to commemorate 30 years of the transformative 1991 reforms and to understand the challenges that need to be addressed as we slowly come out of a pandemic.

The Presidential address was by Dr. Shankar Acharya, Former Chief Economic Adviser and author of An Economist at Home and Abroad.

“The once-in-century pandemic has had a major impact on the Indian economy. All indices like the GDP, unemployment, female participation in the labour force, fiscal deficit and debt were impacted. Lockdowns became a common policy during this time. This led to income/consumption losses creating a high vulnerability among the poorer sections of India. There will, however, be economic recovery even though there is still a high level of uncertainty due to the pandemic.

“The biggest impact has been on anon-agricultural informal sector. There have been significant policy initiatives over the last two years and they are a step in the right direction. If the effects of Covid-19 and other constraints on our medium term growth performance outweigh the reform intention, then it may lead to a period of modest growth over the next five years,” he said.

Professor (Dr.) C. Raj Kumar, Founding Vice-Chancellor of O.P. Jindal Global University (JGU) in his inaugural address said: “The 1991 economic reforms created a new vision for India which not only impacted the economic sector and the society at large but it also created new opportunities for institution building. The idea of private higher education institutions with a view to improve the quality of education and promoting excellence is an outcome of the idea whose time had come.

“The reality was that though India has historically contributed to knowledge society globally, the contemporary evolution of Indian education at the dawn of Independence was limited. We only had 20 universities and today we have over 1,000 universities and over 50,000 colleges. We strongly believe that there are critical elements to improving the quality of governance to improve higher education.

“This includes commitment to internationalization, advancing research, interdisciplinary learning, high quality faculty and equitable access to education for all. The economic reforms of 1991 that were ushered in the country led to other forms of reforms that further shaped the socio-economic future of India. Today, the National Education Policy 2020 has enormous implications with the potential of re-imagining the future of Indian universities, creating an intellectual, political and social consciousness and political impetus for the improvement of higher education,” he added.

Notable addresses were delivered by Dr. Amar Patnaik, and Dr Sasmit Patra, Members of Parliament, Rajya Sabha.

Other eminent speakers at the Conclave include Mr. Ajit Pai, Distinguished Expert, Economic & Finance, Niti Aayog, Dr. Ashok K. Lahiri, Former Chief Economic Adviser, Government of India and Dr. PTR Palanivel Thiagarajan, Minister for Finance and Human Resources Management, Government of Tamil Nadu and Dr. Mukulita Vijayawargiya, Whole-Time Member of the Insolvency and Bankruptcy Board of India (IBBI).

The Global Finance Conclave will host 55 speakers including the current Chief Economic Advisor to the Government of India, 2 former Chief Economic Advisors and noted economists, 1 Minister of Finance and Human Resource Management (TN), 2 Members of Parliament (Rajya Sabha), 3 Members of State Legislative Assemblies, 1 Senior Expert from the NITI Aayog along with academics, economists, bankers and lawyers.

Dr. Ashish Bhardwaj, Professor & Dean, Jindal School of Business and Finance said, “The reforms of the 1990s changed the grammar of our country and the confidence of our people forever. Since the historic developments that happened 30 years, there is a need to reflect on the implications of India’s growth story from 1991 to 2021 and beyond.

“Understanding where we came from and how we emerged, will help us understand where to go from here and how to get there. Answers to these tough questions will emerge from deliberations in the Conclave. To a large extent, the fate of the world will depend on what India decides to do, how fast we do it, and how quickly we learn the lessons of the past,” he added.

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