India growth can top 6.5% for a decade, says economic adviser
The economy is better placed than before to be able to pursue non-inflationary growth, says V Anantha Nageswaran
INDIA’S economy can sustain growth of more than 6.5 per cent to 7 per cent over the next decade, supported by investments in physical and digital infrastructure, the country’s chief economic advisor V Anantha Nageswaran has said.
“The omens are good for us to continue the steady growth rate” of that pace over the next decade, Nageswaran said at an event hosted by the National Council of Applied Economic Research in New Delhi.
“The economy is better placed than before to be able to pursue non-inflationary growth,” Nageswaran said on Wednesday (May 8). “This also helps absorb the challenge of overheating.”
Prime Minister Narendra Modi – who is seeking a third term in the ongoing elections – wants to see India become a developed nation by 2047. While he hasn’t defined what that goal means, analysts say India’s economy would have to expand by more than 8 per cent annually for the next quarter century to achieve high-income country status.
Nageswaran said an ideal growth rate for the Indian economy would be between 9.5 per cent and 10 per cent, similar to what China experienced for over three decades from the 1970s. However, it was more important for the South Asian country to maintain a moderate pace of expansion over a longer period, he said.
India needs to grow on the strength of the domestic economy and for that to happen, Nageswaran said local and state governments need to cut down on regulations to make it easier to do business. He also called on more investments to give India’s youth more training opportunities and access to health services.
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It’s a significant issue because for the next two decades, India is home to the youngest working age population among major economies. More than half of the population of 1.4 billion is below 30, but there’s not enough jobs to go around even for the highly educated.
Chances are “quite high” that India’s growth exceeded 8 per cent in the fiscal year that ended in March and the economy will likely expand more than 7 per cent in the current financial year, Nageswaran said. The rainfall pattern in the months ahead will be crucial for the growth outlook, he added.
Nageswaran said India’s inflation should settle around the central bank’s target in the current fiscal year and there shouldn’t be “nasty upside surprises.”
India’s monetary policy committee is mandated to keep inflation within a target range of 2 per cent to 6 per cent and the central bank wants to see it at 4 per cent before cutting interest rates. Retail inflation eased to a 10-month low in March due to a decline in food and fuel prices. BLOOMBERG
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