India has 10% growth potential: Jaitley

Washington: The path to 10 per cent growth in the Indian economy is not impossible, Finance Minister Arun Jaitley has said citing economic reforms, policy changes along with a good monsoon as the basis for his optimism. 

“This (10 per cent growth rate) is reasonably possible. That is where India’s potential is,” Jaitley said at an event here soon after his arrival on the second leg of his nine-day US tour to attract American investors. The Minister said India’s seven plus per cent growth rate came against the backdrop of a terrible monsoon last year and a second round of crop destruction in March this year. 

The manufacturing sector was almost crawling, and the growth rate was around 5 per cent, he said. “Now with a lot more money being invested in infrastructure and the Governments even conducting its fiscal policy in order to help the manufacturing sector, there is significant growth possible as far as this area is concerned,” he observed.

Hopefully, with a better monsoon this year, agriculture must do better and would add to the nation’s economy, he said. The Goods and Services Tax (GST) has the potential to add at least 1 per cent to the gross domestic product (GDP) of India, he said, adding that India grew by 7.3 per cent last year in terms of gross domestic product.

“It is important that we reach that target, but it is more important that we sustain it for a couple of years,” the Finance Minister said in his remarks on Putting India back on track: A pathway to double-digit growth at top US think tankAmerican Enterprise Institute (AEI). 

“If we are able to sustain it for a couple of years, then I think, we will be able to have direct benefits as far as India is concerned, more jobs, better economy and hopefully over the next 10 years or so deplete the poverty levels in the segments that are more impacted by it,” Jaitley said, giving his overview of his Government’s economic policies.

“I can’t say as to what figure India’s growth rate would achieve. But I am certainly of the view that the seven-and-a- half per cent growth that we are presently at is not India’s optimum potential. This year, we hope to touch about 8 per cent,” he said.

Once the impact of policy changes made by the new Indian government and investments in key areas like infrastructure, agriculture and industry is felt, Jaitley said, “I think there could be a significant growth”. If inflation stays at moderate level, one should logically expect interest rates to go down, which would directly impact and add to the Indian economy, he said.

“The cumulative effect of all these plus favourable global winds, I think the journey between 8 and 10 per cent is not an impossible journey,” Jaitley said. He said that the Government still has pending work at hand and noted that the Land Bill is a “difficult challenge”.

“The Land Bill is a difficult challenge...I think we will have to fight it out and explain the benefits of the land bill because it is intended for the development of India’s rural areas,” he said. Jaitley said that in the coming years, India’s manufacturing sector “is going to up” significantly and cited the Make in India programme, coal mine auction and steps to boost small scale industries in rural areas.

“We have several other reforms in the pipeline. The bankruptcy court, reducing the number of permissions required for setting up businesses in India, a public procurement law, a law on expeditious execution of disputes relating to big projects,” Jaitley said.

“In terms of fiscal deficit, from an all-time high of 6 per cent plus, we have brought it down to 4 per cent. Our current account deficit (CAD) in the last quarter was 0.2 which is quite an exciting figure for us.”  

Capital formation has improved. Some trickling effect on the infrastructure area has just about started. The power sector has performed quite well,” he said.

The social programmes of the Government, including the Swachh Bharat Abhiyan, have become mass movements and are producing great results, concluded Jaitley.

On Friday, Jaitley had said that global investment into India had been deterred in the past due to “instability of policy, particularly taxation policy.” 

“What investors always look for is that the policy would either be stable or improve. They don’t want it to move backwards,” he said adding that in terms of taxation, “we didn’t do ourselves a favour by adopting an approach which was not sustainable.”