India will become world’s third-largest economy by 2027-28: Ex-NITI Aayog VC
3 min read . Updated: 02 Feb 2023, 11:23 AM IST
Premium- Panagariya added that India will ‘certainly remain’ the fastest-growing major economy for several years to come
India is on the cusp of returning to a high growth trajectory, said eminent economist Arvind Panagariya. He voiced confidence that India will become the world's third-largest economy by 2027-28.
The former chairman of NITI Aayog said that at present India is the 5th largest economy, "so it's another five years. We are already in (the year) 2023. So 2027-28, India should be the third-largest economy".
On the economic survey, the economist said, "narrative that comes across tells the story of a much stronger economy" than the one that is growing at 6.5%.
“My sense is that given where India stands currently, it should get back to 7% plus kind of growth rate," he said.
Panagariya added that India is currently in a spot that it was in 2003 when the growth rate picked up to close to about 8% and the country sustained that kind of rate for a few years.
The economists said several reforms have been implemented and weaknesses in the economy have been cleaned up during the Covid pandemic such as banks NPAs and weak balance sheets of the corporates.
"We're seeing this surge in both public and private investments, the fact that policy reforms have happened, lots of infrastructure has been built up. And the fact that there is an effective government in place, very credible (government)," Panagariya said.
On Union Budget 2023, the eminent economist said, "A government which realises its strengths and which is I think the reason you don't see a whole lot of populism in the budget, even though this is the last full budget before parliamentary elections, tells you and makes me feel that India is on the cusp of returning to a high growth trajectory".
Panagariya added that India will “certainly remain" the fastest-growing major economy for several years to come. He projected that India would maintain about a 7% growth rate over these years and if the country takes measures to open up the economy further, particularly on the trade front with liberalisation requiring “a good bit of knocking down of the customs duties", then “we could get to easily 8%."
He said the "rest of the strengths" for achieving this growth are present in the system. Some of the reforms that are ongoing need to be implemented, for instance, the labour law reform.
"If we can do that, I absolutely have no doubt that we would sustain 7% and could in principle, I think, touch 8 per cent."
Referring to the announcements in the budget, he said his expectations were “fully met".
On fiscal consolidation, the debt to GDP ratio had escalated to about 84 per cent as it stands currently after Covid because expenditures had to be raised at the time and revenues took a hit, which led to very large fiscal deficits, leading to the accumulation of debt, he said. “So we needed to get back to consolidation and the Finance Minister has made a good effort in that direction."
The revised estimate for 2022-23 for the fiscal deficit is at 6.4 per cent and the estimate for 2023-24 is now placed at 5.9%.
“It's a modest reduction in the fiscal deficit. But given the other features of the budget, I personally think that even that modest reduction in the deficit carries a good signal," Panagariya said.
He added that the Modi government has been very successful at implementing infrastructure projects on scale and at speed.
Panagariya said he had been suggesting that it was time to get the reform of personal income taxation because the country had made reasonably good progress on corporate profit tax reform, bringing the tax rates down to over 25%.
“So this (personal income tax) was a long-awaited reform and a big one so I am very pleased with that," he said.
(With PTI inputs)
