Garg exuded confidence that while the country is on course to recording a growth rate of 7-8%, with greater focus on start-ups, MSMEs and infrastructure investment, it can achieve even higher rates of expansion.
India is poised to double the size of its economy to $5 trillion by 2025, economic affairs secretary Subhash Chandra Garg said on Monday. He said the inflation target of 4%, plus/minus 2 percentage points — set by the Reserve Bank of India — won’t be breached, amid concerns over the impact of elevated oil prices and the fiscal slippage on price pressure. Garg exuded confidence that while the country is on course to recording a growth rate of 7-8%, with greater focus on start-ups, MSMEs and infrastructure investment, it can achieve even higher rates of expansion. At $2.5 trillion, the Indian economy is currently the sixth-largest in the world. “I think it is very reasonable to expect if the economy remains focused on producing goods and services and generate demands for next 7-8 years…we can achieve the level of $5 trillion by 2025. That’s a reasonably-set goal,” Garg said at the CII Global Industry Associations Summit.
The country’s gross domestic product (GDP) is estimated to grow 6.6% in the current fiscal, against 7.1% in 2016-17, mainly owing to disruptions caused by the roll-out of the goods and services tax and the residual impact of demonetisation. However, the economy seems to have left behind temporary shocks due to such moves, as the GDP grew 7.2% in the third quarter, witnessing a steady expansion from 5.7% in Q1 and 6.5% in Q2.
On inflation, Garg said: “We have been extremely successful in adhering to that (inflation target) and going forward also, I don’t see any major risk in not adhering to that.”
Retail inflation eased to a four-month low of 4.44% in February, against 5.07% in the previous month, as disinflation in pulses kept a lid on price pressure in food articles. However, analysts have said sticky core inflation — which has mostly hovered over 4.5% since January last year — and elevated global crude oil prices pose upside risks to inflation. These apart, the implementation of the Budget proposal to hike in benchmark prices of kharif crops to one-and-a-half times of production costs, monsoon rains and unfavourable base effects (CPI inflation was low in most part of 2017) will drive the inflation movement in coming months.
The central bank, already uncomfortable with the potential spillover effect of the Centre’s fiscal deficit slippage in FY18, is only expected to be more hawkish. The Centre now targets to cut its fiscal deficit to 3% by 2020-21, against an earlier target of 2018-19, although the economic affairs secretary had hinted that the target could be attained by FY20. The fiscal deficit is expected to touch 3.5% of the GDP in 2017-18, according to the revised estimate, higher than the earlier target of 3.2%. The government has said the slippage of 30 basis points would have been bridged had the government factored in a full-year GST collection, instead of that of 11 months in the first year of its launch.