NITI Aayog’s Ashok Lahiri Cautions Against Expansionary Policy Amid Global Inflation

Economic Outlook

NITI Aayog Vice-Chairman Ashok Lahiri recently cautioned against adopting a knee-jerk expansionary economic policy, citing persistent global inflationary pressures. Speaking at the CII Banking Colloquium, Lahiri noted that rising costs in food and petroleum, combined with the potential impact of El Niño, necessitate a prudent fiscal and monetary stance.

Key points from his address include:

• Inflationary Risks: Global price stability is under threat from supply chain uncertainties, specifically referencing the Strait of Hormuz.
• Policy Stance: He supported the Reserve Bank of India’s recent decision to raise the repo rate by 25 basis points to 5.5 per cent, emphasizing that it is "better to be safe than sorry."
• Investment Strategy: He urged a cautious approach, suggesting that immediate aggressive expansionary measures may prove counterproductive in the current climate.

Banking and Industrial Development in Eastern India

Beyond macroeconomic policy, Lahiri emphasized the evolving role of banks, particularly in the eastern region of India where the credit-deposit (CD) ratio remains low compared to southern states.

Strategic Recommendations for Growth

• Matchmaking Role: Banks are encouraged to leverage their networks to connect investors with business opportunities, acting as facilitators for state industrial growth.
• Regional Disparities: Highlighting the eastern region's CD ratio of 47.5 per cent, Lahiri called for infrastructure-heavy projects, such as a deep-sea port or industrial parks, to signal a new epoch of growth.
• Supporting MSMEs: While advocating for large-scale industrial units to attract investment, Lahiri reminded stakeholders of the importance of nurturing today’s small and medium enterprises (MSMEs) into the industrial leaders of tomorrow.

To verify these statements, readers may consult official press releases from the NITI Aayog or the Confederation of Indian Industry (CII) regarding the Banking Colloquium proceedings.