Indian economic growth 'extremely fragile', needs all support: RBI Monetary Policy Committee member Jayanth Varma

RBI MPC member Jayanth R Varma said that out of the four engines of growth for the economy, exports and government spending supported the Indian economy through the pandemic, but other engines need to pick up the baton now.

India's economic growth is now 'extremely fragile' and needs all the support that it can get, as private consumption and capital investment are yet to pick up, RBI Monetary Policy Committee (MPC) member Jayanth R Varma said on December 23.

Mr. Varma further said out of the four engines of growth for the economy, exports and government spending supported the Indian economy through the pandemic, but other engines need to pick up the baton now.

"I like to think in terms of the four engines of growth for the economy: exports, government spending, capital investment and private consumption. "...while exports cannot be the main driver of growth because of the global slowdown, government spending is necessarily limited by fiscal constraints," he told PTI.

Observing that experts are waiting for many years for private investment to pick up the slack, Mr. Varma said that concerns about future growth prospects appear to be deterring capital investment.

"The critical question is whether the fourth engine of private consumption will remain buoyant after the pent-up demand dissipates over the coming months. I, therefore, fear that economic growth is now extremely fragile and needs all the support that it can get," he said.

Earlier this month, the RBI revised its growth estimate for FY23 to 6.8% from the earlier seven per cent, while the World Bank revised upwards its GDP growth forecast to 6.9%, saying the economy was showing higher resilience to global shocks.

Mr. Varma, a professor at the Indian Institute of Management (Ahmedabad), however, asserted that India does not face a threat of recession unlike many other countries of the world.