Subdued global economy and moderate private sector investment will continue to pose challenge in the next year, Finance Minister Arun Jaitley said.
“As I speak at the end of the year, the current engines which are driving the economy will continue, and beyond that the three downsides are global economy, a moderate private sector and agriculture,” he said here.
The Finance Ministry in its mid-year economic analysis earlier this month lowered the GDP growth forecast to 7-7.5 per cent from 8.1-8.5 per cent projected in the Economic Survey released in February this year.
“If we had good agriculture then we had been close to the kind of figure (Chief Economic Adviser) Arvind Subramanian had been talking about because not only agriculture adds to GDP but spiral effect also takes place,” he said.
Stressing that economy requires multiple engines of growth, the Finance Minister said the global tail winds can be an engine which unfortunately are not there.
“A very buoyant private sector can be an engine which is not. A bumper agriculture can be an engine which it is not. Therefore you have to rely on other engines which are pre-dominantly public investment, FDI, private investment in some areas start-up, IT, telecom and then some consumptions,” he said.
On the positive side, he said that subdued prices of oil and increased public spending would continue to propel growth.
“I think the silver lining in this for India is the oil prices and this is enabling us to fund through public investment one of the principle engines of growth,” he said, adding, increase in private investment, FDI inflows and good monsoon will augur well for the economy.
As regards reforms he said only few legislative reforms left.
“After you take those reforms...I see essentially only three things---all your increased resources you put in physical infrastructure, social infrastructure and irrigation...Positive IIP figure if it picks up as a pattern and does not merely reflect patchy trend then that augurs well,” he said.
On the issue of sacrificing fiscal deficit for growth,
Jaitley said, “CEA is an adviser. He is entitled as domain expert to laud his views. That’s the idea by having a non- government functionaries advising the Government and therefore if you have to choose between his view for fiscal deficit you should sacrifice growth particularly when you are in three point something range, you are not in alarming range.”
“That’s his view. I am sure there would be contrary view. You will wait for the Budget for the Government’s view,” he said.
With regard to Pay Commission, the Finance Minister said it would add pressure on fiscal situation of the government for initial two-three years which will be ultimately balanced with increase in revenues.
“When Pay Commissions have to be implemented, the quantum you spend on salaries wages and pension, the first two-three years it spikes up but then revenues also increase year by year (to balance),” he said.
Asked about subdued response to gold monetisation scheme, Jaitley said, “this will come in phases. As the scheme gets popular it will pick up. like a good film, the word of mouth matters. A good scheme is like that.”
