India’s Double Digit Growth - Is 10% GDP Growth A Wishful Thinking? Here Is What The Top Economists Have To Say
Is India poised to reach a double digit growth rate? A decade earlier, this question seemed a bit far fetched with think tanks hailing a host of factors to work in tandem to achieve this magic number, ranging from domestic saving and investment rates to a sound global economy.
It was almost 5-6 years back, when during this time, the planning commission had originally set a target of a double-digit economic growth for the concluding year of the 11th Five-Year Plan (2011-12). The financial crisis recovery bowed us down with the actual growth rate turning out to be just 6.7 per cent during that period. Today we are targeting the same ambition- A shift from single to double.
Despite of the slowdown in the GDP growth rate to 6.1 per cent in the fourth quarter to March 2017, the top economist of the country are hailing optimism. This optimism, however, comes at the back of certain remedies that we ought to implement.
Bilal Jalan, former Governor, Reserve Bank of India, leads the ray of optimism by stating the background of a strong democracy and understanding the fact that we are capable of achieving this number.
“First there is a theoretical point that are you capable of achieving this growth rate? The answer is yes, we are. We have all the resources required to achieve this growth rate, we have the technology, capital, entrepreneurship and we have all the infrastructure, so that the demand and jobs could be increased”, says Jalan.
He adds, “Taking all the point into consideration and the current indicators, we need to recognize that we are capable of achieving a 10 per cent growth rate but it may not happen unless all the factors outside our control are handled. By and large, if we are achieving 7-8 per cent then we are doing well for ourselves. I am very optimistic about the country’s future.”
“This is what we should aspire to,” says Gurcharan Das, Indian author, commentator and thought leader, who echoes similar sentiments on India’s growth story despite the slowdown of the economy and the overall recovery. He links the 10 per cent growth rate with the job situation of the country.
“We need to take the GDP to upto 8-9% at least if not 10%. It was the sole promise that the Modi government made and they ought to deliver on the same”, says Das.
Rakesh Mohan, former Deputy Governor, Reserve Bank of India and a Distinguished Fellow, Brookings India, recently helmed a collection of essays in his book India Transformed, based on the 1991 reforms, mention a very important aspect saying, ‘When we make up our mind, we can do things, if it was done once, it can be done again’.
Given the current growth rate, he finds the 10 per cent GDP a difficult target but feasible for the country to achieve a high economic growth rate in future.
“We need to be clear in terms of public investment in infrastructure. We must understand that the public sector requires investment with respect to capacity. In order to get to a higher growth rate, we have to take the public investment level up to nearly 40 per cent of the GDP to get to a 10 per cent growth rate. It is at 32 per cent at present. It had gone up to 37 per cent in 2008-09. You can’t increase public investment, unless public resources are increased. Our tax-GDP ratio has remained roughly constant for the last 25 years. Given the huge increase in incomes, this doesn’t make sense”, says Mohan.
However, with the goods and services tax coming in, many more people are expected to come under the tax net. He adds on to say that the tax-GDP ratio must increase by two or three per cent of GDP, and the infrastructure investment ratio to a tleast 8 per cent for the next four to five years, for a 10 per cent growth rate.
The NPA issue comes as a priority for most of the industry leaders. The private sector debt is casting a dark shadow on India’s growth story and economic stability. All three economists are confident that with RBI gaining a tougher stance and the reforms sweeping in, the issue can be resolved in the coming few years.
“We took time to get there but are we on it now. The NPAs can be reduced to a reasonable level to what they are. The other problem is that the public sector banks should not depend on the large corporates for the lending or credit demand. The credit supply must depend on their performance”, says Jalan who ends by mentioning the problem of implementation in the country.
A 10 per cent growth rate story would be hailed only when implementation becomes a reality.
“We need less government, not in terms but democracy, political system or the parliament but in terms of the structure of governance. It should be less dependent on what different ministries decide. We need to decentralize the implementation of the policies that we announce.”
The above speakers were speaking at THINKERS Sandbox, an event held by THINKERS & Penguin Random House with YES BANK and the YES Global Institute as the Presenting Alliance Partner
