The Chief Economic Advisor K Subramanian said the economic measures announced by the Government are in the right direction and it (Government) would do all that is needed to sustain the growth momentum.
“It is important to focus on economic growth and bringing about structural reforms which is what the policy announcements that have been made seek to do,” the CEA said speaking at the Dr MCR Institute of Human Resource Development, after the inaugural function of the 94th Foundation Course for civil servants.
On the stimulus package, he said, “I think the clear message is that this is a Government that listens and a Government that cares. We will focus on the economic growth and do all that is necessary to ensure growth.”
“We are still the fastest growing economy in the world and we will continue to be in that position. In the Economic Survey, we talked about the virtuous cycle. Investment slump affects productivity and later affects exports and various other issues including consumption. Therefore, we must focus on investments and that is the clarity we provided in the Economic Survey,” he said.
“In an economy there are a multiple variables. In countries that have grown over a period, investment has been a key driver but consumption can be force multiplier,” he explained.
“Our export share is still very small and share in the global trade is at 2 per cent and we still have enormous opportunity to grow. Lets say even if there is some shrinkage in the pie of global trade, we can still grow ours and that is why we have put our emphasis on productivity. And exports cannot grow unless we emphasise on productivity,” Subramanian said. “There is good news about the US and China sitting together for trade talks. There may be a breakthrough,” he said.
Investment and growth
On GDP numbers, he said “We have to see how the growth pans out. We have to wait and watch. The growth in the first quarter was 5.8 per cent which we have taken it into account. Investment is what eventually helps growth. The investment as a percentage of growth was 40 per cent and this has to grow to that level and above.”
“The ₹70,000 crore announced for re-capitalisation of banks is quite important because the financial sector matters a lot for the economy and credit is lifeline for the economic growth,” he explained.
Referring to the Government target of becoming a $5-trillion economy, he said “This growth has to come from investments. The OECD talks about economic growth through consumption. An analysis of various economies that have grown by over 6 per cent plus for over 10 year period after the World War II shows that the growth was mainly driven by investments which were backed by consumption.”