India's economy is expected to grow at around 5.5% in the fiscal year to March 2015, the finance ministry said in a report tabled in Parliament on Friday.
India's economy is expected to grow at around 5.5% in the fiscal year to March 2015, the finance ministry said in a report tabled in Parliament on Friday.
Pronab Sen, Former Advisor, Planning Commission says even if the government goes ahead with planned expenditure cuts, GDP growth target may be achieved as a lot of these would really be rollovers. Through this, the government can basically defer the actual cash outgo but it doesn't materially change the demand condition, he said.
He hopes that government will come forward to play an active role in monitoring exchange rate after realising the currency strength was hurting exports.
Below is the transcript of Pronab Sen's interview with Latha Venkatesh & Reema Tendulkar on CNBC-TV18.
Latha: There are plenty of statements coming in and among them is that the latest rupee strengthening to hurt some export sectors. Is this a welcome recognition by the government?
A: That is difficult to say because the extent of appreciation wasn't that great anyway. So in any case the government saying that the role of the rupee goes beyond the financial sector is a welcome sign and hopefully the government will have an active approach towards the exchange rate rather than a passive.
Latha: Will 4.1 percent be too challenging for the government unless they crunch plan expenditure?
A: I am almost certain they will. In any case the budgetary expectation on tax collection was optimistic to say the least and they were banking on a strong revival of the economy, so we are talking about 13.5 percent nominal GDP growth and now you would be lucky if you get something like 11.5-12 percent. They will fall short of taxes – there is no question about it but that happened in the last two years as well and the reaction has been compression of planned expenditure. The question arises – will planned expenditures get compressed below what had happened last year and my suspicion is no, it won't.
Reema: Do you get a sense that we are over-estimating growth for the next fiscal year because all the signs that we get even the tax collection so far are sub-7 percenyt — it's 5.7 percent for direct tax and 7.1 percent for indirect tax. We have companies telling us that consumer durables demand has not yet picked up. Do you get the sense that we are overestimating GDP growth for the next fiscal year and there is a possibility that it could be even sub-6 percent?
A: There is a compositional issue that is involved out here. As far as both indirect taxes and corporate direct taxes are concerned, growth out of corporate India will lead to much higher tax revenues than the growth coming from the SME sector which is what has happened in the last few years. The issue then is what are the expectations of the distribution of growth between corporate and the non-corporate.
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