India will meet GDP growth forecast despite Brexit concerns: CEA Arvind Subramanian

Chief economic adviser (CEA) Arvind Subramanian feels that the GDP growth forecast of 7 to 7.5 per cent in the current fiscal could be met despite Brexit concerns as good monsoon is likely to offset some of the bad effects from Brexit. Speaking to a group of journalists on the sidelines of a function in Hyderabad to celebrate the "Statistics Day", Subramanian said that the monsoon is spreading well and good agriculture produce will bring down the inflation, which is now mainly concentrated in one area-pulse prices. Here are some of the key take aways from the views expressed by CEA on key economic issues.

GDP Growth: At the moment, we are not revising our growth forecast made in the Economic Survey (7 to 7.5 per cent) and will broadly stick to it. There are Brexit concern but factors like good monsoon will offset it. Monsoon: It is spreading reasonably well with good rains expected in July, which is  when all the planting happens. So, on the whole we are expecting good agricultural production.

Food Inflation: Most of the food inflation is now concentrated in one area that is pulses. They are  grown more in rain-fed areas and we have had two years of drought so the production of pulses has been disproportionately affected. Also, in cases of shortfall, it is difficult to import the kind of pulses we want. The government is working on this and wants to dramatically increase the production of pulses in the country. We have incentivised cultivation of pulses and have also raised the minimum support price substantially. Further, if these crops can be grown more in irrigated areas, the problem of pulses inflation will be addressed quite significantly.  

Pulse prices: Prices of pulses should start coming down as the monsoons progress. Current Account Deficit (CAD): It is going to be very manageable and hopefully will be within 1 per cent of the GDP especially with the oil prices coming down.

Gold prices: The gold price effect should unwind itself as well because remember there is always a broad correlation that when dollar goes up commodity prices come down.  

Brexit: India is a safe haven in the context of Brexit. Look at the interest rates of government securities (G-Secs). Normally, when there is a crisis people sell G-Secs, which pushes the interest rates of G-Secs higher. In the first two-three days (since Brexit announcements) the interest rates on Indian G-Secs went down, which means people are buying Indian bonds and not leaving it. And that is in contrast to several emerging market countries like South Africa, where G-Sec rates went up.

Eyes on EU & US: There is still lot of uncertainty. We have to be watchful. We need to keep a watch on economic growth in EU and the US because it will have implications on our exports. PSU Banks: Let's see how it turns out. Certainly the aim is to get fewer but more efficient banks.

Trade policy: We have to see how we can get more market access in other economies and be more proactive in terms of our trade relations with the UK and EU.