Should states follow the Centre in having debt ratio as their primary fiscal policy anchor?
It would be somewhat premature on my part to comment on it. We would also like to see the kind of recommendations that the Finance Commission has made. It has to be deliberated on and the pros and cons of it have to be discussed. We need to reflect on it. I think it won’t be fair on my part to give you an off the cuff answer at the moment.
Will the new GDP series, expected to be released soon, impact the survey’s growth projections?
It depends on what kinds of numbers come up. So, we will see. The new series might revise the GDP levels (in absolute terms) more than the growth rates. I really doubt that it is going to require a meaningful recalibration of the (survey) growth projections per se.
How do you see the impact of trade deals on India’s exports?
I think free trade agreements (FTAs) will definitely contribute to exports because some labour-intensive manufacturing sectors will have lower or zero duty access, especially to the large EU market once the agreement becomes operational. So, I do see the FTAs having a pretty significant impact on our merchandise exports.What should India do to woo foreign investors in a big way?
I think gross foreign direct investment (FDI) inflows have been better this fiscal than in FY25 but the net inflows are not what we would have liked. This is because profit-taking by foreign investors on investment made in earlier years has been taking place. Unfortunately, this gets captured in a given year. On top of that, you have the outbound investments by Indian businesses. There are multiple factors playing out here-interest rates in the developed world, geopolitical uncertainty and, of course, the US tariffs.If these were not there, particularly the tariffs, given India’s very good performance in the aftermath of the pandemic, credit rating upgrades, improving infrastructure, and all the new reforms taking place, I would expect the inflows to be significantly higher. And that is what will happen once the tariff situation resolves itself.
The concept of “entrepreneurial state” would be different from the entrepreneur state. What would be its role?
We don’t want the state to become an entrepreneur. It’s not state capitalism. Entrepreneurial state is about the manner in which we respond to decisions becoming outcome-oriented rather than process-oriented, development-oriented versus extraction-orientated. It’s also about predictability and continuity, risk-taking and where actions can be reversed and courses can be adjusted based on empirical developments. These are the elements of an entrepreneurial state. De-regulation is going to be an important element of it but this is more than just deregulations.
Is the latest rupee depreciation a matter of concern? What would be an ideal rupee level for you?
There is no particular rupee level (vis-a-vis dollar) automatically beyond which it becomes concerning and below that it is not concerning. It depends on the context. Under certain conditions, of course, inelastic imports will become costlier if the rupee keeps depreciating against the dollar. But that is an empirical estimate. It’s difficult to pick a number and say this is the right level.
What is keeping private players from investing in a big way?
I don’t think private investment is being held back in a very significant way because I am told the 2024-25 numbers, which we will get next month, will show a good pick-up. Predicting the 2025-26 number is a bit premature at this point. Multiple factors seem to be influencing investments by private players-geopolitical uncertainty, China competition, manufacturing deflation over there, excess capacity, and the supply of critical inputs being weaponised. But under the circumstances, if I look at the overall gross fixed capital formation ratio of 30% of GDP, it’s a good number compared to that in many other countries.