India has potential to grow between 8 to 10%, says CEA Arvind Subramanian

Washington: India's economy has the potential to grow between eight to 10 percent if the country continues the pace of reforms, Chief Economic Adviser (CEA) Arvind Subramanian has said.

"There is no doubt that India needs to grow very rapidly to be a leading power (of the world). My own view is that India's potential growth is somewhere between eight to 10 percent," Subramanian told a Washington audience.

In Washington ahead of the US visit of the Union Finance Minister Arun Jaitley to attend the annual spring meeting of the International Monetary Fund and the World Bank, Subramanian said, "It's worth noting that India has been growing at 6 to 6.5 percent for the last 35 years."

"It would place India among sustainably fastest growing economy and actually among democracies, non-oil countries... So India's economic transformation has been pretty good," he said.

Subramanian said achieving a growth rate of eight to 10 percent is feasible on a number of factors including the continuation and pace of reforms and global environment that promotes exports.

"I certainly think it is feasible provided we continue the pace of reforms at a reasonable pace," he said.

"My own view is that if you continue with the current pace of reforms, get a few more things done, eight-10 per cent growth is really realisable," the top economic advisor said.

Subramanian noted that in the last one and half years there has been progress made in terms of foreign direct investment (FDI).

"If we can maintain this pace of reforms, may be accelerated India's potential would be realised," he said.

At the same time the top Indian economist said that eight-10 percent growth is also contingent on a reasonable external environment.

"My own view is that no country does eight-10 percent growth sustainably without its export growing at a significant double digit pace," he said.

"There is a very low possibility or probability that India can grow eight-10 percent growth without rapid growth in exports. I think, the possibility for India being different from these nations is that perhaps India does not have to do manufacturing, perhaps it can do a combination of manufacturing and services," he said.

Subramanian was participating in a panel discussion at Carnegie on recent call by Prime Minister Narendra Modi for India to be a leading power and a report authored by top American thinker Ashley Tellis in this regard.

"In Modi's vision, a leading power is essentially a great

power. However, India will only acquire this status when its economic foundations, its state institutions, and its military capabilities are truly robust. It will take concerted effort to reach this pinnacle," Tellis said.

"There are three obstacles that come in the way of India's rise. First historically India has never desired to be a great power. It was content to be a great civilisation to be recognised as a great country but never pursued the goal of becoming a great power in the sense that conventional great powers are seen in international politics," he said.

So Prime Minister Modi's recent shift advocating that India be a great power can truly be transformational if they do the things required to get them there.

"The second is that India has never built the kind of economy that allows it to generate capital, produce the resources that the state can use to underwrite great power ambitions. There is whole agenda of economic reform that is implicated here and which India has still to complete," he said.

"And the third constraint has been India?s own weaknesses with respect to state capacity," Tellis said.

The United States at least for the 17 odd years has looked at India as a great power in waiting, because it fundamentally accords with the American national interest.

"US interest consists of maintaining a balance of power in the broader Asian Pacific region particularly because of China's rise." Tellis said.