Energy Prices, Balance of Payments, Current Account Deficit Govt Priorities Now: CEA

New Delhi: Chief economic advisor V Anantha Nageswaran on Friday said that managing macroeconomic fundamentals like the balance of payments(BoP) and current account deficit (CAD) has assumed a larger priority for the government right now as the West Asia conflict has triggered a massive global energy shock.

Speaking at an event on securitisation in Mumbai, Nageswaran said that the West Asia conflict has led to an energy shock where the prices have moved north after the supply impact due to issues in the Strait of Hormuz. “In the current context of having to deal with the energy price, energy shock, the CAD and the BoP, etc. These, therefore, have assumed a much larger priority, urgency at this point,” Nageswaran said.

Nageswaran also stressed that the financial market has to keep up with the activity in the real sector and reminded that it was the extra focus on derivative products, which led to the Global Financial Crisis in 2008. When asked specifically about the Rs 3 lakh annual income limit leading to qualification as microfinance, Nageswaran said that he is against this system of putting numerical thresholds and would rather like the policy to come out with ratios on the same.

Income thresholds when the economy was $1 trillion in size cannot be the same when the economy has grown to over $4 trillion, and the average incomes have also grown. On the priority-sector lending (PSL) mandate, Nageswaran also said that the industry must thank the PSL mandate, as it is leading to higher volumes.