After having helped the government frame economic policies in exceptional times that brought the global financial system to its knees, the finance ministry’s chief economic advisor is moving on to assume his new role as an executive director to the IMF. A day before he leaves office, Arvind Virmani, who was appointed CEA in July 2007, tells Gunjan Pradhan Sinha that the US growth spurt in the third quarter will accelerate the revival of domestic investment. Excerpts:

With the US clocking positive growth numbers for the first time in months, how do you think it will change the scenario in India and the world?

Over the past three- four months we have got indications that recession in the US is coming to an end. The recent news confirms only one fact — that the future won’t be worse. Even though it is a larger than expected bump up, recovery will follow the pattern of wavy and stretched out ‘U’ for the global economy. For India, it spells out mitigation of the uncertainty which crept in due to the external environment. In my expectation, it will accelerate revival of domestic investment and the economy will be less dependent on stimulating forces.

And for the rest of Asia?

Countries heavily dependent on exports would not see a fast paced recovery compared to India. Until they change their orientation, a number of nations including China would have to wait before investment levels pick up. A stimulus approach is a short term measure, it cannot be sustained for long. India is at an advantage as it has a neutral export policy and huge domestic demand.

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