Ideal growth rate for India is 8-10%: Subramanian

The growth in gross domestic product dipped to 5.7% in the first quarter of financial year 2017, coming to a three-year-low. However, the ideal growth rate of the economy should be between 8% and 10% according to chief economic advisor, Arvind Subramanian.  According to him, as the economy overcomes certain challenges, exports improve and the implementation of Goods and Services Tax stabilizes, the growth rate will improve.

He prudently didn’t comment on the time-frame within which the growth rate will recover. However, sharing more details on the road map to recovery, Subramanian said, “The economy is facing certain challenges. Once we overcome them, the growth will surely improve. At a time when the growth was around 8%, the growth in exports of both goods and services stood at 25% which was significant.”

When asked if the cascading effect of demonetization and GST implementation decelerated the growth, the chief economic advisor to the Union government said, “The growth had already begun slowing down in the second quarter of 2016. These moves further reinforced this deceleration. Demonetization did restrict cash flow. However, now the cash is back in the system. As far as GST is concerned, it is still stabilizing and SMEs are still coping with the new structure and compliances.”

Talking specifically about credit-offtakes, Subramanian said, “Overall credits have picked up recently, especially with increase in lending to consumers. However, credit to industry is a concern. Firms cannot spend and therefore, cannot borrow and banks cannot lend because they have bad assets. The credit cycle will begin to pick up the once recapitalization of banks takes place.”

On GST, he said, “We are taking the feedback and criticism very seriously, and are very responsive in bringing about necessary changes.”

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