New Delhi: All eyes are on the markets after Friday's meltdown. It remains to be seen whether the Sensex will rebound on Monday after its worst fall in four years.
World Bank chief economist Kaushik Basu has warned that the next year and a half will be tough for India and for the global economy. Speaking exclusively to CNBC-TV18, Basu said capital control measures and import restrictions are unwarranted in the government's fight to shield the rupee.
"Global economy optimism actually, I don't share for the next year and a half. I will say a year and a half is still going to be a very difficult time for the global economy," basu said.
Calling the rupee control measures taken by government 'emergency measures', Basu said, "The risk of going towards a mindset control, frankly, I don't worry. I feel right from 1991 that mindset on a trend changed. Yes, these are emergency reactions the government has taken as rupee was moving a lot. So I don't think there is going to be a long term mindset change."
"However, my own instincts are for current account deficit problems, exchange rate problems of the kind that India is seeing, it's always best to use that to work on the export sector, to work on and energise the manufacturing sector, so that you respond not by trying to curb imports but use this as a great excuse to do things to facilitate exports. So, I would have liked really greater action on that front rather than controls, but I don't think there is a risk of long run move in that direction," he added.
Basu also said that the country's biggest stumbling block on the exports is administrative costs. "We're doing a little better on exports. But India's biggest stumbling block on the exports is administrative costs. Make those easier and our manufacturing sector will take off. This situation should be used to look into the governance of the manufacturing sector and there are big gains waiting around the corner for India," Basu said.