The Indian economy is likely to grow at six per cent in 2014-15 and if the new government delivers on its promise of good governance, reversion to a growth rate of around 7-8 per cent can occur in coming years, Harvard University professor Gita Gopinath said.
“Let’s just say that 6 per cent growth rate in FY15 would not be unreasonable… if the Modi government delivers on its promise of good governance, speedy implementation, improved infrastructure and manufacturing revival, 7-8 per cent growth is certainly within reach,” she said in an interview to PTI.
As per the Economic Survey for 2013-14, India’s GDP growth rate will improve to 5.4-5.9 per cent in the current fiscal after remaining at sub-5 per cent level for past two years.
The Survey added that reversion to a growth rate of around 7-8 per cent can only occur beyond the ongoing and the next fiscal.
The domestic economy was expanding by over 9 per cent before being hit by the global financial meltdown of 2008.
“The Budget provided few details on how the fiscal deficit will be reduced,” she said on Finance Minister Arun Jaitley’s resolve to bring down the the fiscal deficit to 4.1 per cent in 2014-15.
“There were some new revenue sources, like the increase in cigarette taxes and the service tax base, but bigger changes on the expenditure end will be required to make the fiscal deficit sustainable,” said Gopinath, the first Indian woman to become a professor at the Economics Department of Harvard University.
She also pitched for India’s rating upgrade and underlined the need for fiscal prudence.
“If the economic environment improves and higher growth rates return there is certainly a case for an upgrade. One of the “do no harm” pieces of the Budget is that it did not introduce new subsidies and handouts. That is a welcome sign of fiscal discipline,” she added.
Describing Modi government’s first Budget as a “safe” one, Gopinath said among the announcements that caught her attention included a serious resolve to move to Goods and Services Taxes (GST) regime and cutting subsides, including those on fertilisers.