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Seeking to allay fears that the country’s economy is slowing, in the wake of the latest national income data, Chief Economic Advisor Arvind Subramanian has asserted that it is, in fact, recovering.
The Indian economy is on course to record close to 8 per cent growth this fiscal, Subramanian told reporters at North Block here.
If tax revenues maintain their current pace, overall gross domestic product (GDP) growth for the entire fiscal year will be substantially higher than the latest number (GDP growth of 7 per cent in the first quarter), said Subramanian.
The Economic Survey released in February this year had forecast GDP growth for 2015-16 at 8.1-8.5 per cent.
Overall, economic growth is moving in the right direction, although it is still below the desired pace, Subramanian said.
One real challenge that looms ahead appears not to be price inflation, but possible price deflation, he warned.
“We are closer to deflation territory and far away from inflation territory. It would make sense to focus more on deflation than inflation”.
He, however, declined to comment on whether the Reserve Bank of India should cut policy rates sooner than later given the deflationary trend.
Subramanian also said that the Indian economy is still not growing anywhere close to its full potential.
He felt that it may not be right to look at GDP growth sequentially and come to any conclusion that growth had slowed from 7.5 per cent in the fourth quarter of 2014-15 fiscal to 7 per cent in the first quarter this year.
On a year-on-year basis, headline GDP has increased from 6.7 per cent in the first quarter last fiscal year to 7 per cent in the first quarter this fiscal year.
However, he refrained from commenting on what explained the fall in gross value added (GVA) growth from 7.4 per cent in the first quarter last fiscal to 7.1 per cent in April-June this year.
GVA decline
“We should look at the totality of numbers,” he said when asked about the fall in GVA rate on a year-on-year basis for the first quarter.
“Unlike what people have taken away from the latest national income data, both GDP and GVA point to a direction that the economy is recovering.”
The CEA expects consumer price inflation to hover between 5-5.5 per cent by the end of this fiscal year, the same range as projected in the Economic Survey.
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