Eminent economist Jayanth R Varma expressed hope saying that capital investment would begin to pick up in a few quarters, even in the old economy, and that the next fiscal year would also see decent growth.
In an interview with PTI, Varma, who is also a member of the Reserve Bank's Monetary Policy Committee (MPC), said that while inflation is a concern, it is currently the persistence of inflation rather than its level that is of concern.
According to Varma, the pre-pandemic level of economic activity has already been exceeded, and the remainder of this fiscal year should see further improvement.
He noted that dozens of new economy companies received significant funding in both private and public equity markets in calendar year 2021, and that these companies would have positive spillover effects into the rest of the economy.
When asked about the economic threat posed by the new COVID variant, he said the Omicron variant creates uncertainty, but he believes the world is gradually learning to live with the Covid-19 virus.
"We should expect more new virus variants to emerge, but the virus is becoming less dangerous as vaccination coverage improves," he said, adding that health precautions like masks and social distancing have become ingrained in "our habits and in organisational systems and processes."
As a result, most sectors of the economy, according to Varma, can now operate with little risk to employees and customers.
The Reserve Bank of India (RBI) has lowered its growth forecast for the current fiscal year to 9.5 percent from 10.5 percent previously, while the International Monetary Fund (IMF) predicts growth of 9.5 percent in 2021 and 8.5 percent the following year.
Concerning high inflation, Varma noted that CPI inflation had recently breached the upper tolerance band of 6%, but had recently been well within it, inflation will not fall below the 4% target, and that it will instead stabilise at 5% for an extended period.
In November, retail inflation rose to a three-month high of 4.91 percent, owing primarily to an increase in food prices, while wholesale price-based inflation soared to more than a decade high of 14.23 percent, owing primarily to price hardening in mineral oils, basic metals, crude petroleum, and natural gas.
In response to a question about cryptocurrencies, Varma stated that a strong and self-assured country like India should not be afraid of them.
"Cryptocurrencies that are properly regulated pose no threat to a country that has good economic management and well-functioning regulatory frameworks. As a result, there is no justification for a prohibition "he stated emphatically.