India should privatise banks and further open its economy in the coming years to boost growth beyond the current 6.5-7 percent levels, said Arvind Panagariya, Chairman of the Sixteenth Finance Commission, on Wednesday.
“Privatisation of banks is an important part of reform that is required so that we get out of repeated cycle of NPAs and the government has to step in rather slowly. In the last twenty years, we have gone through two cycles of NPAs and the government had to come and clean up each time,” Panagariya said at an interactive session organised by FICCI on the book ’India@100’, authored by K V Subramanian, Executive Director, International Monetary Fund (IMF).
Panagariya noted that any country that has witnessed a surge in NPAs have experienced a slow down in the economy. He also underscored the need to focus on privatisation of public sector enterprises, noting that India has to be a proper market economy. “ Despite an expansion in private sector and a in public sector, overall manufacturing activity remains centered in public sector - not a particularly efficient sector”.
After the economy opens up further in the next few years, Panagariya said there is a need to bring down import tariffs and enter into more free trade agreements (FTAs). “ Opening up is critical to the whole strategy of attracting MNCs in the China-plus-one-game,” he said.
Panagariya also made a case for early notification and implementation of the four labour codes.
With a sustained growth rate of 10 per cent for the next 23 years, Panagariya said the GDP can touch $31 trillion by 2047, when India turns hundred. He is also positive that India will break out of middle-income level by 2047, and highlighted that India has been growing at a rate of ten per cent in dollar terms for the past twenty years (2004-24).
K V Subramanian emphasised on the need to double down on good economic policies that the country has had over the last ten years and look to grow at 8 per cent on a sustained basis. He expressed confidence in India achieving a GDP of $55 trillion by 2047 .