Economic affairs secretary echoes minister to say a USD 10 trillion economy by 2030.
New Delhi: Finance minister Arun Jaitley has again ignited the hopes of achieving 8 per cent plus growth rate, saying if the current rate is maintained India will surpass the 7-8 per cent economic expansion pace.
Earlier, Jaitley had nearly forecasted a 7-8 per cent growth rate despite global uncertainties. He believes the country will retain the tag of the world's fastest growing major economy; also the economy is now fairly large to display a certain degree of resilience.
He said the government intended to overtake the UK and come close to Japan in terms of GDP, if not per capita income, in the next few years. In Q2FY19, the country posted a 7.1 per cent growth, disappointing many.
Addressing AGM of Ficci, Jaitley said despite uncertainties like trade war and rising oil prices, India maintained a growth rate of 7-8 per cent. He, however, underlined the need for more reforms to accelerate growth.
The finance minister said India needs stability in reforms and policies to per quicken economic growth rate from the current 7-8 per cent, indirectly hinting at the need for the Narendra Modi government’s return to power and industry’s efforts towards that.
Reacting to Jaitley’s assertion, Pronob Sen, former chief government statistician, said the finance minister was just stating what (above 8 per cent growth) we had projected in 2004-9. He carefully avoided the term ‘double-digit’ growth but said we would get out of this 7-8 per cent growth rate.
Jaitley's over 8 per cent growth target also has another trigger – the reversal of backdated series data, which the government had to revise since the print gave the UPA government credit for double-digit growth and invited flak for the NDA due to single-digit expansion.
He advised industry and investors not to be worried about the next 5-6 months as the high-pitched political rhetoric would come as distractions in the run up to the 2019 Lok Sabha elections.
Jaitley defended the government over standoff with RBI and denied the charges that his government is playing with autonomy of important institutions.
Speaking at the event, economic affairs secretary Subhas Chandra Garg said, “We can build a new economy whether you talk about 2025, 2022, 2030, a $10 trillion economy by 2030 or $5 trillion by 2025. All these are feasible. We can achieve that if we pay attention to all major traits. While the Indian economy has a large overhang of public debt, he said there is a need to focus on reducing this in the next 4-5 years.
On rating agencies refraining from upgrading the sovereign rating, he said, “Most credit rating agencies give a lot of weightage to the debt to GDP ratio. We focused on the fiscal deficit presently. But going forward, that is the area where we will focus,” he said.
Earlier in June, prime minister Narendra Modi had said the world expects India to become a $5 trillion economy soon. Garg said India can become a $10 trillion economy by 2030 by addressing some concerns.
Last month at the 5th annual defence estates say lecture, Jaitley had said India has standardised itself for 7-8 % growth and stressed higher investments in infrastructure.
Recently Moody’s managing director and chief credit officer for Asia Pacific Michael Taylor said India’s GDP growth will slow to just above 7 per cent for FY19 and FY20.
“Liquidity constraints faced by some non-bank financial institutions will likely tighten overall credit supply and slow the country's economic growth rate to just above 7 per cent. It is below an estimated 7.4 per cent out-turn in FY18 and below the pickup in growth that we envisaged a few months ago,” Taylor said.
Moody’s counterpart Fitch has slashed India growth forecast to 7.2 per cent for FY19 on reduced credit availability. “Improved macroeconomic fundamentals have placed India on the growth trajectory of 7-8 per cent and the country would have to invest heavily in infrastructure over the next two decades to graduate into a middle income economy”, it said.
“Any of these figures of growth depend upon the whole economy growing together. Just growth in one or two sector wont help. No country has sustained more than 3-4 per cent growth in farm sector, which always be a drag on the economy. Other sectors would have to grow at much higher rates to sustain high economic expansion,” Sen said.
While the minister said there will be a lot of 'transient populism' in the next 5-6 months due to elections hinting towards sops like farm loan waivers, the former chief statistician agrees saying there is going to be a lot of agricultural loan waiver as we approach towards the elections but doesn’t see anything wrong with it inherently. “If farm loan waiver is not given farmers who borrowed won’t be able to get bank credit again, and the net result is they will be forced to go the money lenders to borrow at higher rates pushing them to debt traps further, “ he said.