Fiscal situation, level of public debt in Indian states a concern

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Arun S: Nov 12 2012, 02:05 IST

India’s GDP growth would fall to a decade-low of 5.6% this fiscal and it could tick up a bit to 6.7% in the next fiscal only if the government expedites the reform measures announced in September and clears the backlog of projects soon, Asian Development Bank (ADB) managing director general Rajat M Nag tells FE’s Arun S in an interview. Nag said a major uncertainty facing India’s and Asia’s growth is the economic situation in the United States and Europe. ADB forecasts inflation in India to touch 8.2% in 2012-13 and then slip marginally to 7% in 2013-14, he said. The government could find it challenging to meet the fiscal deficit target of 5.3% in 2012-13 and bringing it down to 3% in 2016-17, he added. Another issue that Nag said India and China have to deal with is the rising inequality and the need for inclusive growth, as well as ‘green growth’ or lack of it. Nag also said the world is viewing the robust debates on corruption in India as part of a welcome process. Good governance is a key condition for democracy, he said in the interview, adding that good institutions and accountability that goes beyond corruption are necessary conditions for India’s growth story to continue. Edited excerpts:

What is your view on India’s subsidy regime and its impact on the fiscal deficit?

The high fiscal deficit has been a major concern. The government has recognised it. We appreciate that the government has put together a

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