New Delhi:
Following is the text of the clarificatory note of Dr. Kaushik Basu, Chief Economic Advisor, Ministry of Finance regarding his lecture at the Carnegie Endowment in Washington on April 18, 2012:
"As the Chief Economic Adviser I have often expressed opinions which are not necessarily that of the Ministry of Finance or of the Government of India. This is one of the strengths of India that it allows us to generate and discuss new ideas without the Government having to first endorse them.
At the Carnegie lecture the gist of my argument was that 2014 was an important year because numerous European banks would have to begin to repay 1.3 trillion dollars worth of loans that they had received from the European Central Bank. This could precipitate a major global economic crisis - a third round of crisis after 2008 and 2011. I also asserted that despite India's current slowdown (growth in 2011-12 was 6.9%), we will see Indian growth picking up slowly initially. But soon after the possible European crisis of 2014, we could see India as the world's fastest growing economy, faster than even China.
I mentioned also, as I have done several times in India, that, thanks to coalitional democracy, there is some slowdown in economic reforms and decision-making. I specifically mentioned that the problem with the GST reform was that the opposition realized this is a good reform. Therefore, it was reluctant to let it happen under the current regime. A single-party majority government would not face this problem. If there is a single-party majority in the next election, that will facilitate such reforms. I argued that some reforms, such as FDI in multi-brand retail, were likely to happen sooner because in principle they did not need the support of the opposition; and this will give a boost to the mood of the economy.
Some of this was reported on poorly, juxtaposing my comments on Europe in 2014 with the Indian election of 2014. This is unfortunate because the central message of my talk was the possible European crisis of 2014 and India's major rise thereafter, likely overtaking China."