Government optimistic of positive growth next year

Chief Economic Advisor Krishnamurthy Subramanian agrees with forecast made by S&P, Fitch

 

New Delhi(Agencies): The Centre on Thursday said it agreed with the assessment by two international rating agencies of India’s GDP growth rate easily crossing eight per cent next year.

The forecast by the two agencies – Standard’s and Poor and Fitch – that India can clock economic growth of 8.5 to 9.5 per cent is heavily predicated on the government carrying out the structural reforms announced during the unveiling of the Rs 20 lakh crore Covid stimulus package.

 “That is the path we are quite likely to go in the future,” the government’s Chief Economic Advisor Krishnamurthy Subramanian told newspersons over video conference.

While there will be a contraction this fiscal, there will be a jump next year but the official was unwilling to predict whether the GDP growth will touch near zero during 2020-21 or enter into negative territory.

At the same time, he acknowledged that the expectations of the rating agencies were heavily based on the government carrying out the radical changes it had promised in an array of sectors from agriculture to public sector enterprise.

He, however, declined to give any estimates for economic growth during the current financial year on grounds that many chips were yet to fall in place.

In case the recovery begins in the second half of this year, India may escape with a bottom of the barrel growth rate, he suggested.

Asked to respond to reports that banking will be catgeorised as a strategic sector in which the government would restrict public sector companies to a maximum of four, Krishnamurthy said work was on in the government to identify the sectors but mentioned that world-over banking was seen as a strategic sector.

In case, the government follows the global example, public sector banking will see a major round of privatisation and mergers.

Talking about another global rating agency, Moody’s, having effected a country downgrade, he pointed out that this rating was a mapping of probability of default which is a function of willingness to repay the borrower and the ability of the borrower to repay.

 “In India’s case, its willingness to pay is nothing short of gold standard. Its ability to pay is also gold standard. It is part of our cultural upbringing of paying back all our debts,” he explained.