New Delhi: India is expected to accelerate to 8-10 percent growth rate in two to five years on account of structure reforms and encouraging competitive federalism.
"Basically, next 2-5 years, we will reach 8-10 percent growth. There is no contradiction in saying that this year the world economy is weak and therefore we need to focus on domestic demand," Chief Economic Adviser Arvind Subramanian told reporters today after Economic Survey 2015-16 was tabled by Finance Minister Arun Jaitley in Parliament.
"In medium to long-term, we have to have exports as engine of growth that is necessary for us to attain 8-10 per cent growth," he said.
Terming India as a bright spot, Subramanian said there is case for pursuing structural reforms like implementation of Goods and Services Tax.
Moreover, promoting competitive federalism will also push growth, he said, adding there are reasons to believe that good economics make good politics.
However, there are some disappointments with regards to impediments in strategic disinvestment and twin balance sheet (TBS) problem.
"One of the most critical short-term challenges confronting the Indian economy is the TBS problem - the impaired financial positions of the Public Sector Banks and some large corporate houses - what we have hitherto characterised as the Balance Sheet Syndrome with Indian characteristics," he said.
By now, it is clear that the TBS problem is the major impediment to private investment, and thereby to a full-fledged economic recovery, he said.
With regard to GST, he expressed hope it will get through in the coming days.
"I think the GST is a temporary set back we are very much hoping that it will be retrievable," he said.
Asked whether there is a case for deviating deficit target for the next fiscal, Subramanian said, this is a call the government has to make keeping in view various factors as there are arguments both in pro and against this.
"There are very good arguments for a strategy of aggressive fiscal consolidation, as earlier envisaged, and equally good arguments for a strategy of moderate consolidation that can place the debt on a sustainable path while avoiding imparting a major negative demand shock to a still-fragile recovery.
The Union Budget will carefully assess these options," he said.
However, there is a need to revisit medium-term fiscal framework, he said.
"In any event, the time is ripe for a review of the medium-term fiscal framework. A medium-term perspective to expenditure planning is necessary. The fundamental growth and fiscal outlooks have changed considerably since the Fourteenth Finance Commission provided medium term revenue projections," Subramanian said.
And, above all, there are new developments in and approaches to, medium-term fiscal frameworks around the world from which India could usefully learn, he said, adding, world over there is medium term review of fiscal frameworks.
Emphasising that there is a need to recaliberate expectation about India's performance, he said, there is need to sustain macroeconomic stability to insulate the country from external factor.
"There is need to recaliberate expectation because India is so entwined with the world which is facing slowdown," he said.
In his opening comment about the survey, he said, this also somewhat ambitious.
"This has been done without any bad intent and hopefully we have been non discriminatory in making enemies but i will say if we haven't tread on toes we would not have done a good job... I think in the end the survey is about producing challenging analysis and ideas," he said.
"I am happy to say that this is the first rainbow survey and by that I mean this is literally first multi-coloured document," he said.