Amid a growing chorus that only a structural revamp would get the Indian economy back on a high-growth path
Amid a growing chorus that only a structural revamp would get the Indian economy back on a high-growth path, finance minister P Chidambaram on Thursday said the GDP growth could be 6% in the current fiscal “if investments pick up”.
The minister's outlook is more sanguine compared with recent predictions of multilateral agencies like IMF and World Bank and some rating agencies which put the figure between 5.2% to 5.7%.
Reeling out data to show that during the past decade with the United Progressive Alliance at the helm India's economic growth was still higher than “other countries”, the minister said: “If investments pick up...I think it's possible to aim and achieve a growth rate of 6% in 2014-15 even while I recognise that the international situation remains very, very tepid.” He said if the new government “follows sound policies” and the 10-point agenda outlined by him in the interim Budget, the growth this year would be considerably better than 2013-14.
As per the advance estimate released in February, Indian economy grew just 4.9% in FY14, only a tad higher than a decade-low of 4.5% in the previous fiscal. The growth was 8.9% in FY11 and an average of about 9.5% in the three years to FY08.
Chidambaram's statement comes at a time when analysts lament the stagnation in the government's productive spending and warn that corporate investments would take lead from government's productive investments. Crisil, for instance, pointed out last week that productive expenditure by the government over a 2-year period — fiscals 2013 and 2014 — rose by a mere R110 per person whereas spending in the remaining categories rose by more than R1,900 per person. The agency added that lower productive spending by the government in the past couple of years added to already slowing growth and policy hurdles that caused delays in project clearances and, thus, discouraged private investment.
The finance minister minced no words in criticising the NDA regime's economic management between 1999-2004. “I may point out that 2000-01 and 2002-03 were the worst years since liberalisation in terms of growth and Prime Minister (Atal Bihari Vajpayee was forced to replace (his) finance minister,” he said. The minister also blamed the BJP for thwarting the UPA's tax reform bids. “Who has stalled GST and DTC? When a consensus on GST was nearly reached, it were the governments of Madhya Pradesh and Gujarat that stalled further progress. Issues that had been settled were re-opened. The consensus reached on the draft of the Constitution Amendment Bill was broken and work on the GST bill was interrupted.”
In a television interview earlier this month, the BJP's prime ministerial candidate Narendra Modi had attacked the Centre for not paying attention to the states' problems. “There is a lack of communication between the Centre and states. The government needs to treat states as equal stakeholders regarding the issue of GST. Any act or law which goes against the interests of even a single state won't be good for the country as a whole,” the Gujarat chief minister had said.
Chidambaram conceded that people were accepting 5% growth, but added that “good economics is good politics. I would be very unhappy if somebody goes out with a message that good economics is not good politics because the opposite is a frightening thought”.
Chidambaram also said that several government programmes had been affected due to the model code of conduct out in place by the Election Commission. “It has affected (the economy) in the sense that a number of programmes which require spending have slowed down. I don't think this kind of clampdown on all activities is justified. Only something which has a very clear political significance should be frowned upon.”
To strengthen his claim of UPA's creditable economic record, Chidambaram said that India's installed power capacity went up from 1.13 lakh MW in FY05 to 2.43 lakh MW in FY14, coal and lignite production from 389 million tonne to 562 million tonne, steel production form 40.7 million tonne to 82.2 million tonne and fertiliser production from 14.2 million tonne to 36.5 million tonne.
While many pitch for deeper reforms, RBI governor Raghuram Rajan had said that for the most part, India’s current growth slowdown and its deficits were not structural problems. They could, he said, all be fixed by means of modest reforms. “This is not to say that ambitious reform is not good, or is not warranted to sustain growth for the next decade. But India does not need to become a manufacturing giant overnight to fix its current problems,” Rajan had said. The immediate and more feasible tasks, according to the RBI governor, were to clear projects, reducing poorly targeted subsidies.
IMF had forecast a modest recovery for India with the GDP growth accelerating from 4.6% in FY14 to 5.4% in FY15 and 6.4% in FY16.
Source: Financial Express
