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We need to focus on ease of trading now: Arvind Subramanian, Chief Economic Adviser
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There are four and half reasons why the Indian economy decelerated when the world economy picked up pace , according to chief economic advisor Arvind Subramanian. But, in a conversation with ET editors, Subramanian said he saw a directional change in the economy in the July-September quarter. Edited excerpts: 


 I feel part vindicated because when I contrasted how they treated India and China, two months later they downgraded China and three months later they have upgraded India. The way they treated China and the way they treated India, it made no sense at all. So, some of it was just long overdue because there was a lack of consistency. Their call from what they said was institutional change and deeper structural reform had been enacted and that was the reason why really, whether it really eases of doing business whether GST, the whole JAM agenda, so they focused on those institutional things which I think was what finally convinced them. 


 

Directionally, the second-quarter numbers have been better than the first quarter whether it is the IIP, the quarterly earnings, also the export numbers. So, let’s see how the numbers pan out, but the hope is and the expectation is that directionally things will be different this quarter than last quarter. There is some sign credit is also picking up. 

 

Is there a concern about the jobs situation, losses due to demonetisation? Where is the economy headed? 

We should step back and see how the economy is doing and then look at employment. Again, let’s distinguish the broader employment picture from any kind of demonetisation impact. I think many indicators have pointed to a slowdown in economic activity since about the second quarter of the last year. That was what was worrying everyone. Three-four, maybe even five quarters, we had various indicators, GDP growth, investment, credit growth, IIP, all these were decelerating and that was what was causing concern. Why is it Indian numbers were slowing down when in fact around the world last two quarters they were picking up. There are four and half explanation for this. 

 

Two are the transitional factors. Growth started slowing down from before, demonetisation and GST have kind of exacerbated that deceleration trend. Those are two factors. Third, if you look around the world and if you compare real interest rates in India and the world. Until before a year, our real interest rates were not so off the others. But, in the last one year, our real interest rates have become higher than the rest of the world. Cost of capital and associated strengthening of the rupee created a dampener on activity in a directional sense. 
( Melissa )22 Nov,2017

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