A few years of meaningful nominal growth will make a significant difference to fiscal consolidation, said Chief Economic Advisor V. Anantha Nageswaran, adding that there was no reason to believe the government is deviating from the fiscal consolidation path.
Nageswaran was speaking to CNCB-TV18 in the backdrop of the Economic Survey 2023 being tabled in the Parliament earlier in the day on January 31. The survey document, which is prepared under the CEA's administration, holds key highlights of India's macroeconomic landscape and government policies as well as reforms that can be ushered in.
Talking about the survey, the CEA said, "I told my team we are not presenting a survey, but an economic story backed by evidence. Everything has to be backed by evidence."
Nageswaran also spoke about how India needs to create more space for welfare and social development.
According to the survey report, the CEA combined government initiatives such as health and education and other facilities and has started a conversation on the 'quality of life' — a first of its kind approach in India, which is still an emerging economy.
On economic growth
Nageswaran said if additional reforms are undertaken, it is possible for the country's growth to go beyond 7 percent in the remaining decade.
The Economic Survey 2023 estimated the FY24 GDP growth to be at 6-6.8 percent. The survey's baseline forecast for real GDP growth is 6.5 percent.
"Given the uncertainties we face, a difference of a few basis points on GDP estimates is not big," the CEA said.
The RBI in its MPC meeting in December estimated the GDP to grow 6.8 percent, paring the projection for FY23 for the third time in the month.
Earlier this month, the National Statistical Office (NSO) estimated the Indian economy to grow at 7 percent in 2022-23, as against the expansion of 8.7 percent in the previous fiscal.
On growth risks and inflation
The CEA said the downside risk is higher compared to the growth estimates in the global context. He did not see any domestic risks to India's growth estimates.
The COVID-19 pandemic, the Russia-Ukraine war, sanctions on Russia and China's zero-COVID policy, caused a disruption in supply chains, causing prices of commodities to shoot up. To combat inflation, central banks across the world hiked interest rates, following the US Fed's cue. Now, the world is staring at a possible global slowdown as well as possible recession.
"We face political and economic uncertainty from the global situation and my best assessment is that risks are dominantly from global events," he said.
Capital expenditure
Nageswaran felt that India has to continue with both government as well as private sector capex. "There is room for both to grow," he said, adding that India needs to work on the quality of expenditure with higher capital expenditure.
"The quality of expenditure is more important than the headline deficit," he said, adding that it has seen quite a lot of improvement as well. Talking about India's debt sustainability, the CEA said it is not in serious doubt.
On nominal GDP & FDIs
The government expects the nominal GDP to continue to be ahead of cost of borrowing and the same would help achieve fiscal consolidation.
He said India also needs more investments on the automatic route.
Talking about foreign direct investments (FDIs), Nageswaran said they have shifted to a higher level. "We are on the right track to attract FDI," he said, adding that it is a work in progress.
