5.7% GDP Growth Rate Still A Very Strong Number, Says Sanjeev Sanyal
As India’s economic lustre dims with GDP falling to as low as 5.7%, Sanjeev Sanyal, Principal Economic Advisor, Ministry of Finance, defends the low growth rate by stating the other long-term reforms working alongside.
“5.7% is still a strong number. All our macro stability numbers have dramatically improved. We are sitting at more than 400 billion worth foreign exchange reserves, the current account deficit for the last financial year was below 1%, and inflation stands at 2.5% average. Yes growth has slowed down but we have introduced major long-term reforms for stable growth,” said Sanyal on the sidelines of World Economic Forum.
The government is “shifting India fundamentally to a different kind of economy, a rule-based, trust-based economy,” said Sanyal, noting that the government anticipated that its reforms like GST and demonetisation would have unintended, short-term consequences but the long-term outlook for the economy would be more promising.
“Since this is a feedback looped make a policy-based system, the problems created by GST implementation are well understood and the feedback is taken from SMEs, exporters and they are being fixed,” mentioned Sanyal.
Sanyal also stated that the government is looking at options such as an issue of recapitalization bonds or diluting government stake in Public Sector Banks for the recapitalization of banks.
He also mentioned that the number of banks may come down within the 10-15 range from around 22 at present as part of the effort at bank consolidation. There is scope for both the public sector and the private sector banks to co-exist as both have different risk-return profiles.
“The first part of the clean-up which is recognising the bad assets and the provisioning them is well underway. Step two is the recapitalisation and getting these banks to run again which will be done in the next few months. The government is well aware that the country needs a much larger banking system by multiple numbers,” said Sanyal.
