Global Economy

5% GDP growth merely a result of volatility: Bibek Debroy


KOLKATA: Chairman of economic advisory council to the Prime Minister Bibek Debroy has said that India is on 6-6.5% growth trajectory while the fall in GDP print to 5% is merely a result of volatility. The economic advisor has also observed that the 6% growth level is not a reason for gloom.

“There is significant amount of volatility in rate of growth. The reduction to 5% does not mean we are on a 5% growth trajectory,” Debroy said Friday in Kolkata.

He said there had been instances in the past when GDP growth fell below 5% in a quarter, but recovered to 7% in the very next quarter.

India’s GDP growth in the April-June quarter fell to 5%, lowest in 25 quarters, triggering downgrades in the estimates for the full year.

Moody’s Investors Service has cut India’s gross domestic product growth rate to 6.2% for calendar year 2019 against its earlier projection of 6.8%.

“This (6.2% growth) is not, by any mean, terrible. We need higher growth because we need to create more jobs,” Debroy said, at a seminar organised by CII.

India has set a target of achieving a $5 trillion economy by 2024-25 from $2.7 trillion at present, while the lakh of credit demand amid a slump in consumption creating roadblocks. Credit to industry has been sluggish for several months.

State bank of India managing Director Dinesh Kumar Khara said that that India needs 12% credit growth in the next five years to achieve this target.

In general, private sector investment, or the lack of it, is delaying the path to recovery.

In a separate development, Finance Minister Nirmala Sitaraman has slashed corporate taxes by about a massive 10 percentage points to an effective rate of 25.17% including cess and surcharges to incentivize private investments.

Debroy, on the other hand, has expressed concerns over the stretched government finances and on the issues of Goods and Service taxes, which has turned out to be revenue negative, a deviation from the proposal of making it a revenue neutral scheme.





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