In an exclusive interview with Moneycontrol, Prime Minister Narendra Modi underscored India's unwavering commitment to advancing the interests of the developing world within the G20 framework. To gain further insights into PM Modi's remarks concerning India's macroeconomic environment, CNBC-TV18 reached out to renowned economists, Indranil Pan, Chief Economist at Yes Bank, and Abheek Barua, Chief Economist at HDFC Bank.

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Barua emphasised the pivotal role of the G20 as a global platform designed to harmonize the interests of both the Global North and the Global South, addressing a multitude of global challenges. He highlighted the frequent occurrence of significant developments during the sideline discussions of these forums.

Of particular note was the unique development of India engaging in bilateral meetings with the United States and Saudi Arabia during the G20 summit. Barua underscored the potential economic windfalls resulting from these high-level dialogues, including enhanced market access and improved ease of doing business in India.

He added, “First time in these G20 forums, they're also having a bilateral meetings with the US and Saudi Arabia. I think in both sort of the bilateral conversations that happen at the very top level, as well as what has happened in the B20, there are a lot of economic payoffs and benefits in terms of access to markets, in terms of ease of doing business, and other countries, and so forth. So I remain optimistic about what this will ultimately sort of result in within a reasonably short span of time.”

Read Here | PM Modi on G20 vision, need for credible global institutions and more — full text of his exclusive interview with Moneycontrol

On the topic of fiscal prudence, Pan underscored the limited room for fiscal expansion, given the prevailing macroeconomic circumstances. He stressed the importance of fiscal responsibility in preventing a potential upward spiral in interest rates.

Pan said, “In one word, fiscal responsibility is important. It is important also to prevent any upward spiral in interest rates, given the fact that I do not personally see much of a chance for the Reserve Bank of India to bring rates down, the repo rates down in a hurry, at least in this financial year. And a stable atmosphere in terms of interest rates structure is also important to provide the fillip to the private investments that we are sort of looking ahead to.”

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Turning to infrastructure spending in an election year, Barua noted that some states have initiated investments in infrastructure projects, which he found encouraging. However, he pointed out that any such spending is unlikely to be driven by election-related motives. He commended the central government's commitment to fiscal prudence, emphasizing its responsible approach.

He said, “One of the things that has happened this year, which is again, very encouraging is the fact that states have started spending on infrastructure. So yes, I don't see any sort of election related new infrastructure spending, but whatever, is there on the anvil to be implemented properly because it has sort of a whole bunch of multiplier effects. But all the question that sort of Indranil kind of dwelt on briefly about freebies, etc. I think this the central government is, is fundamentally very hawkish on the fiscal side and it's going to sort of be very, very responsible, fiscally.”

Barua also drew attention to the upcoming state elections, acknowledging that some increased allocations and welfare programs might be influenced by electoral considerations by the states. While this could lead to immediate income improvements for the poor and consumers in certain states, it raises questions about the fiscal sustainability of those states that are already on the verge of a financial crisis. He noted that these states might be tempted to overspend in pursuit of favorable electoral outcomes, which could pose a potential concern.

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First Published:Sept 6, 2023 2:58 PM IST