Former Chief Economic Advisor Kaushik Basu on the economic outlook of India

Says productive spending is required with a focus on small businesses. 

Markets are looking good for a start in 2022. But analysts believe that this is going to be a volatile year for the stock markets, a hint of which we witnessed in December 2021. A lot of discussions has also been on the economic outlook post-covid period and where we are headed as a country.

Is the economy back on track? Is the data reflecting the true story of the people of India? Kaushik Basu, an Indian economist shared his thoughts with Business Today on the current state of the Indian economy and what actions should the government take ahead of Budget 2022. Kaushik Basu is a distinguished professor at Cornell University, US and was a chief economist at World Bank and also a former chief economic advisor for the Government of India.

When asked about the rebound of the economy post-covid, he said that it has been more of a ‘K-shaped’ recovery where the top-end of the society has been doing good but the bottom half of the pyramid is suffering. Even though the rebound is strong, the per capita GDP has been shrinking for the last couple of years. He feels that this k-shaped recovery has put the workers, farmers, and even middle-class people in a very difficult position. Talking about India’s position a couple of decades ago, India was a global story. We competed with China and today India is nowhere near that glory. He believes India can still get there based on strong fundamentals.

He also mentioned the high youth unemployment of 24% in India is a big concern. Now that the formal sector has been picking pace, the informal sector has been doing worse since 2016. The labours are not being absorbed by the formal sector causing huge problems at the bottom of the pyramid. He said the government should focus on this concern by boosting private small businesses which can then absorb workers and create employment. Talking about the inflation part, he believes in the capability of RBI and said that the government should focus on productive spending and creating jobs, they can leave inflation for RBI to worry about.