Pitching for a rate cut by the Reserve Bank, Chief Economic Adviser Arvind Subramanian on Tuesday said there is a need to boost investments to achieve the potential economic growth rate of 7-8 per cent in the next few years.
He also hinted at "other measures" to generate additional revenues if it appears difficult to meet fiscal deficit targets this fiscal with planned Rs60,000-80,000 crore expenditure cut. With inflation declining significantly, there is "room to make monetary policy loose", he said, adding a call will have to be taken by the Reserve Bank.
The Reserve Bank of India (RBI), which is keeping interest rates high at 8 per cent since January, said that it could lower them even before the next policy which is due on February 3.
While Government has been pitching for a rate cut for quite some time, this view has not found favour as yet with RBI Governor Raghuram Rajan who himself was CEA before moving to the RBI as its Governor in September 2013.
Referring to concerns facing the economy, Subramanian said it would be a challenge to restrict the fiscal deficit to 4.1 per cent in the year ending March 2015. He also hinted at some additional revenue measures, in case the expenditure cuts of around Rs60,000-80,000 crore were found insufficient to meet the deficit target.
"The revenue shortfall is between Rs80,000-1,00,000 crore to the Government. Rs20,000 we are going to raise through diesel (excise duty hike). We have to cut (expenditure) between Rs60,000-80,000 crore," he said in an interview to Doordarshan.