JOIN USGDP likely to grow 5.5% this fiscal: Report
India’s economy is expected to grow at 5.5 per cent in the fiscal 2014-15, the declining trend in price rise is expected to continue but adhering to the fiscal deficit target of 4.1 per cent of the GDP will be a major challenge, the mid-year economic review of the government said Friday.
The review tabled in Parliament emphasised that economic growth can only pick up from here if public investment is revived especially in infrastructure sector, taking a completely different turn from the UPA government’s stance where more private investment and public-private-partnership were considered to be a better option.
“There is going to be a flow challenge: attracting new private investment especially in infrastructure. The PPP model has been less than successful. In this context, it seems imperative to consider the case of reviving public investment as one of the key engines of growth going forward….,” said the review titled “Mid-Year Economic Analysis 2014-15”. On fiscal deficit target, the review said that 4.1 per cent was an ambitious target and favoured a revaluation.
“The Government is committed to meeting the fiscal targets for FY 2015, despite the difficult odds engendered by a combination of these factors. How ambitious a target was this? Evaluating the budget from the revenue side suggests that the target was ambitious,” it said.
The review also assumed that the Reserve Bank of India will maintain a status quo ante on the interest rate till the end of March 2015, apparently putting at rest the clamour by industry for an interest rate cut every now and then.
Later, speaking to a media conference, government’s chief economic advisor Arvind Subramanian said that the overall growth outlook had improved considerably.
Subramanian said with the new government there was a relatively “unencumbered political mandate” for decisive economic change and that is reflected in the actions that have been undertaken.
The headwinds from the external sector, but said that the challenges India has been facing are mostly domestic.
The most important amongst them relates to the experience of the last few years that led to over-exuberant investment especially in infrastructure and in the form of PPPS.
There are stalled projects to the tune of Rs 18 lakh (about 13 per cent of GDP) of which an estimated 60 per cent are in infrastructure.
The review pinned a lot of hope on Aadhaar and Pradhan Mantri Jan Dhan Yojana and the Goods and Services Tax which was introduced in the Lok Sabha.