Former Chief Economic Advisor Shankar Acharya said that the RBI should not allow the rupee to appreciate further and time was ripe to reverse it.
“As a short term solution to the economy, the RBI should act now and arrest appreciation of the rupee”, Acharya said.
This would give an impetus to exports and boost the domestic manufacturing sector, Acharya said at an economic forum organised by MCCI here. Acharya, an honorary professor with ICRIER, said that given the present state of the “ailing” economy, said that it would be difficult for the government to do pump priming by increasing expenditure.
“There is little scope for that at the moment”, he said.
This he said was due to uncertainty of the revenue outcome post GST. As per data available, though there has been an increase in gross revenue collection, net revenue is low due to input credits given.
Acharya said “what is worrisome is that in 2017-18, the combined fiscal deficit of the Centre and the states would be around seven per cent of GDP which is very high”.
On the top of that, the states too were in a bad situation due to farm loan waivers, he said. There, he said that the government might meet the investments from current expenditure or borrowings which would again put pressure on interest rates.
Regarding demonetisation, he said it had been a scary experiment by the government which had contracted the economy.