Economic Survey 2015: India headed for 8%-plus growth in 2016, says Arvind ... - Economic Times

NEW DELHI: India is headed for 8%-plus growth next year and on course for 10% expansion in the near future, said an upbeat Economic Survey penned by Chief Economic Advisor Arvind Subramanian. Markets cheered the survey's growth confidence and optimism.

But, equally significantly, the survey argued against over-emphasis on "big-bang" reforms, saying the most effective policies are often those that provide many small solutions.

In this, Subramanian seemed to speak the economist's version of Prime Minister Narendra Modi's political-economy argument. Speaking in Parliament on Friday, the PM reiterated his faith in making many systemic improvements and finding micro solutions.

The PM's and Subramanian's arguments acquire special significance in the light of Saturday's Union Budget, which pundits say must take big and bold measures.

Apart from surveying the present state of the economy and suggesting some policy measures, as all surveys do, the latest one challenges readers to ideate afresh on solutions to the country's myriad problems. Its brash cover, a chart tracking the growth rates of India and China, shows India's growth snaking its way over and above China's in 2015.

Growth Prospects Better

Growth prospects have improved, the survey says, putting aside questions about the reliability of the new GDP numbers with the base year of 2011-12.

New political authority, reforms, low inflation thanks to a global commodity price slump leading to low interest rates, and the prospect of a good monsoon are together likely to accelerate India's growth rate to 8.5%. The government has some room for fiscal activism but should meet its target of containing fiscal deficit at 4.1% of GDP in FY15 and stick to the path of fiscal consolidation in the years ahead. This would mean compressing expenditure quite a bit, and stepping up capital expenditure by cutting down on consumption expenditure.

Transiting to a goods & services tax with a single, globally competitive rate and few exemptions would not just reform the indirect tax structure but also remove the negative protection imposed on Indian manufacturing by the present policy of exempting some imports from several kinds of tax.

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