PM Narendra Modi has twice in the last week vowed to take India's growth rate past 10%, but experts say many hurdles remain
New Delhi: Within a span of just seven days, Prime Minister Narendra Modi has twice vouched to take the Indian economy to double-digit growth, and interim finance minister Piyush Goyal has claimed the target can be achieved by the fourth quarter (January-March) of the current fiscal year.
“The need of the hour is that we should work towards achieving the target of double-digit growth from 7-8%," Modi said on Friday, while laying the foundation stone of the Vanijya Bhawan, which will house the commerce department. The world, he said, is watching when India will break into the $5 trillion economy club by doubling its economy. Modi was reiterating what he had said at the governing council meeting of the policy think tank NITI Aayog on 17 June.
“We can actually see a double-digit growth by the 4th quarter of this year, it is not impossible, there is a demand uptake in the economy, there is a mood in the nation and an aspirational billion is a fantastic marketplace," Goyal had said on Tuesday.
The Indian economy accelerating to a seven-quarter high of 7.7% in the March quarter seems to have fired up the government. However, analysts say it would be better for India to first target a sustained 8% growth. In fiscal 2017-18, the economy grew at 6.7%, a four-year low.
Former chief statistician Pronab Sen said the conditions needed for double-digit growth are unlikely to be present anytime soon. “Private investment needs to pick up significantly, but the woes in the banking sector may drag it down. The global economy is increasingly looking dubious and a lot uncertain with an imminent threat of trade wars breaking out. In such a scenario, India is unlikely to achieve 20-25% exports growth, which is needed to achieve double digit growth," he said.
Former chief economic adviser Arvind Virmani tweeted on Tuesday: “I have heard this many times before. In fact every time growth rises above 7%, we start hearing about the chimera of double-digit growth. The reality is that we have not been able to maintain 8% growth for even a couple of (consecutive) years!"
There have been six episodes in the last five decades when growth rates exceeded 8%, about once in each decade. However, the only instance of growth sustaining at levels above 8% for five continuous years was during 2004-08, with the average growth rate reaching an unprecedented high of 8.8% a year.
This episode benefited from the combined effect of important reforms undertaken in the 1990s and early 2000s, an unusual buoyancy in the global economy and easy global liquidity, leading to sustained growth across sectors.
Interestingly, when asked about his views on achieving double-digit growth, outgoing chief economic adviser Arvind Subramanian on Wednesday said the task becomes that much more challenging as the external economic environment has deteriorated.
“We should certainly aspire for double-digit growth. For double-digit growth, you need favourable external environment and domestic policy reforms that the government is putting together," he said.
In its latest biannual India Development Update, the World Bank in March said attaining a growth rate of 8% or higher on a sustained basis is not guaranteed in the absence of an effective structural reform agenda including in land, labour and financial markets.
“Besides recapitalization, a consolidation of public sector banks, revising their incentive structure to align it more closely with their commercial performance, ensuring a level playing field for private banks, and opening the space for greater competition would be important measures to durably enhance the stability and efficiency of the banking sector," the bank said.