India And Its Competitive Advantage In 2022 Due To Reforms And High Public Spending

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In the face of global concerns induced by the current Russia-Ukraine conflict, India's financial system, and specifically investment banking has improved and its business sector has grown stronger, according to chief economic adviser V. Anantha Nageswaran.

The resilience and strength of the Indian Economy stem from a series of recent changes, particularly banking sector reforms and greater public investment, which drive demand.

The chief economic adviser believes that for the simple reason that India paid a price last decade, India is in a better position than other nations, especially advanced countries. He also talks about how we as a nation experienced problems with the banking system which were later reinforced by the non-banking financial sector stress as we approached 2018.

In 2016, India enacted a new bankruptcy code and established a bankruptcy resolution ecosystem, replacing an outdated system that resulted in unnecessary delays in terms of credit solutions and asset degradation while dealing with industrial sickness. The banking sector is once again in a position to lend more to boost growth, thanks ...
... to the resolution of a major share of bad debt and improved provisioning. The better financial soundness of banks, corporations and investment banking companies has created an environment favourable to increased growth-generating investment in the economy. Businesses have deleveraged their balance sheets in recent years, allowing them to make new investments.

Mr. Nageswaran goes on to say that resultantly, we approach this decade and this conflict (Russia-Ukraine) with a much better financial system and business financial health. So it offers us a lot of cushion, and the Reserve Bank of India has significant foreign exchange reserves, and it has also shown its willingness to combat inflationary pressures with its recent monetary policy action.

He went on to say that India had a rather comfortable level of macroeconomic and policy stability as it entered this moment of global turmoil.

The global monetary tightening, the shutdown, and China's economic slowdown, according to Nageswaran, are all lowering demand for crude oil. "Overall, I anticipate it will be a chaotic and turbulent year with many uncertainty." This will not be an exception for India. But, among the global community of nations, I believe India is better positioned to deal with the aftermath," he remarked.

Finance Minister Nirmala Sitharaman boosted the capital expenditure target for public investment-led recovery of India's pandemic-battered economy by 35.4 percent to 7.5 trillion in the 2022-23 budget.

India is likely to develop by 7-8 percent this year, depending on the length of the ongoing battle, according to the country's main economic advisor.

The ongoing Russia-Ukraine conflict, according to Nageswaran, has disrupted the global economy and escalated commodity prices, particularly for gasoline and food grains. "Food security is one component of it, while inflation is another. Thankfully, we are in a much better position in India than other countries. However, in a few countries, the availability of food is more essential than the price," he explained.