The ambitious 8.1-8.5 per cent economic growth projected for the next fiscal in Finance Minister Arun Jaitley’s Budget is more like a “statistical and not a real number,” Chief Economic Adviser Arvind Subramanian said.
“There are two distinct points here. One is whether the 8 and 8.5 per cent is a real or statistical. What I am trying to say is that it’s more a statistical not the real numbers for the projections,” he said told Karan Thapar on his ‘To the Point’ programme on Headlines Today.
“…the second point, which is a very important point you are raising, is our assumption for any given growth rate, how much tax revenue we are expected to get is called bouyancy…. But what I can assure you is that this year we have made no fanciful assumption on how tax revenues are going to respond,” he said.
The government expects 15.8 per cent growth in revenue collection this year.
This growth in revenue collection is achievable, he said, adding “we are confident to achieve this.”
He further said: “I still stand by the fact that 8 and 8.5 per cent number should be viewed (in the context that) India is a recovering and not a surging economy.
He said 8.5 per cent growth figure is “directionally” fine because there was an uptick in the growth rate from 2013-14 to 2014-15. “What we are projecting is that increasing growth will continue but whether that adds up to 8.5 per cent or 6.5 per cent that’s the open question,” he said.
Asked about credibility of the economic growth projection, he said, the budget is based on projections about nominal GDP growth, which is the sum of real GDP growth and inflation.
“Before the (revised) numbers came out, we were expecting a nominal GDP growth of 11.5 per cent. Broadly that was about 6.5 per cent of GDP growth and 4.5 per cent on inflation,” he said.
“What has happened when new numbers come out …the real GDP growth numbers have gone up but the inflation numbers have actually come down.
“So it turns out that the relevant numbers used for tax revenues and tax revenue projections is the same as before. So in that sense, for the revenue projections the new statistical numbers don’t make difference,” he added.
On bank recapitalisation, Subramanian said the government has allocated about Rs 8,000 crore and it has been linked with performance.
If banks requires more money, he said, it can raise by diluting government stake to 52 per cent.
“Government is willing to see its stake to come down to 52 per cent,” he added.