CAD and BoP Now Top Priority Amid Energy Shock: CEA Nageswaran

New Delhi, May 30 (KNN) Chief Economic Adviser (CEA) V. Anantha Nageswaran has signalled a shift in the government's immediate economic focus, with external sector stability taking precedence as the West Asia conflict disrupts global energy markets.

Speaking at an event on securitisation, CEA V. Anantha Nageswaran said the West Asia conflict has triggered a significant energy price shock, driven by supply disruptions stemming from issues in the Strait of Hormuz. 

Nageswaran noted, "In the current context of having to deal with the energy price, energy shock, current account deficit (CAD) and the balance of payments (BoP), etc. These, therefore, have assumed a much larger priority, urgency at this point," as quoted by PTI.

A Word of Caution on Financial Markets

Refraining from specific policy prescriptions on securitisation, Nageswaran cautioned that financial markets must keep pace with real sector activity — and not race ahead of it. He reminded the audience that excessive focus on derivative products was a key contributor to the Global Financial Crisis of 2008.

Rethinking Microfinance Income Thresholds

On the Rs 3 lakh annual income limit used to define microfinance eligibility, Nageswaran said he is opposed to rigid numerical thresholds, preferring ratio-based criteria instead. 

He noted that income limits set when India's economy was a USD 1 trillion economy cannot remain unchanged now that it has grown to over USD 4 trillion, with average incomes rising commensurately.

PSL Mandate Driving Credit Volumes

On Priority Sector Lending (PSL) — the RBI mandate requiring banks to direct a fixed share of credit to underserved sectors such as agriculture and small businesses — Nageswaran said the industry should recognise its value, as the mandate is actively driving higher credit volumes to critical segments of the economy.

(KNN Bureau)