Growth projects to be over 8%

Calls for rationalisation of subsidies, says doles did not appear to have had a transformative effect on living standards of the poor

February 27, 2015 05:17 pm | Updated November 17, 2021 04:46 am IST - New Delhi

The Economic Survey 2014-15, which Union Finance Minister Arun Jaitley presented in Parliament on Friday, says India is currently in a sweet spot that could “propel” the economy to a double-digit growth.

It forecasts 8.1-8.5 per cent growth for 2015-16 against 7.4 per cent in the current financial year.

Chief Economic Adviser Arvind Subramanian, however, said he favoured the interpretation of a recovering rather than surging Indian economy as the Central Statistics Office’s 2013-14 growth estimate of 6.9 per cent was “puzzling.”

The estimate, he said, was difficult to reconcile with other developments in the economy during that year — capital had flowed out, interest rates were tightened and savings and investments had dramatically declined.

Subramanian said he was fine with the direction of the CSO’s estimate for growth in the current year though.

“The power of growth to lift all boats will depend critically on its employment creation potential,” the Survey said.

Pitching for reforms, it urged the Centre to bring down the fiscal deficit to 3 per cent of the GDP from the current year target of 4.1 per cent, which it said would be achieved.

It recommended compressing government expenditure for achieving this, saying tax collections were likely to be buoyant on account of faster growth and the rollout of the Goods and Services Tax.

Making a case for expenditure reforms, it said India was spending Rs. 3,78,000 crore or 4.24 per cent of the GDP on price subsidies, which were “not the government’s best weapon for fighting poverty.”

Analysing various subsidies, ranging from the public distribution system to water and power, it said price subsidies had not had a transformative effect on the living standards of the poor, though they helped poor households weather inflation.

It also found price subsidies regressive as the rich benefitted more from them than the poor.

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