Rate cut needed to achieve 7-8% growth: CEA

Rate cut needed to achieve 7-8% growth: CEA

Pitching for a rate cut by the Reserve Bank, Chief Economic Adviser Arvind Subramanian today said there is a need to boost investments to achieve the potential economic growth rate of 7-8 per cent in the next few years.

He also hinted at "other measures" to generate additional revenues if it appears difficult to meet fiscal deficit targets this fiscal with planned Rs 60,000-80,000 crore expenditure cut. With inflation declining significantly, there is "room to make monetary policy loose", he said, adding a call will have to be taken by the Reserve Bank.

The Reserve Bank of India (RBI), which is keeping interest rates high at 8 per cent since January, said that it could lower them even before the next policy which is due on February 3. While government has been pitching for a rate cut for quite some time, this view has not found favour as yet with RBI Governor Raghuram Rajan who himself was CEA before moving to the RBI as its Governor in September 2013.

Referring to concerns facing the economy, he said it would be a challenge to restrict the fiscal deficit to 4.1 per cent in the year ending March 2015. He also hinted at some additional revenue measures, in case the expenditure cuts of around Rs 60,000-80,000 crore were found insufficient to meet the deficit target.

"The revenue shortfall is between Rs 80,000-1,00,000 crore to the government. Rs 20,000 we are going to raise through diesel (excise duty hike). We have to cut (expenditure) between Rs 60,000-80,000 crore," he said in an interview to Doordarshan.

"At this stage we feel confident that we can meet it with expenditure cuts. If that's not going to be possible we will look at other measures," he said. The government, he added, is "absolutely committed" to achieving the fiscal deficit target.

Stressing the economy has turned around and the inflation has come down significantly, Subramanian exuded the confidence that the current fiscal will end with a growth rate of 5.5 per cent, up from 4.7 per cent in the previous year.

Narendra Modi or Rahul Gandhi? Who will win the battle royale of the Lok Sabha Elections 2019


Get real-time news updates, views and analysis on Lok Sabha Elections 2019 on Deccanherald.com/news/lok-sabha-elections-2019 


Like us on Facebook or follow us on Twitter and Instagram with #DHPoliticalTheatre for live updates on the Indian general elections 2019.

Liked the story?

  • 0

    Happy
  • 0

    Amused
  • 0

    Sad
  • 0

    Frustrated
  • 0

    Angry