NEW DELHI: India’s growth potential is much higher than seven per cent and can be eight to nine per cent, American economist Nouriel Roubini said on Saturday, pointing out that the reforms being undertaken by the Bharatiya Janata Party government are in the right direction, but the passage is slow.
Speaking at the Global Business Summit, Roubini pointed out that Indian economic reforms process is hurt by political opposition. “Potential growth for India is much higher than seven per cent. It can be eight to nine per cent. Key thing for India is to continue what they are doing but the country needs to accelerate their pace of reform,” Roubini said.
India’s gross domestic product (GDP) growth for 2014-15 was revised to 7.2 per cent from an earlier estimate of 7.3 per cent by the Central Statistics Office on Friday. The government has forecast growth to range between 7-7.5 per cent in the current financial year.
“Despite number of global economic headwinds, Indian economy remains strong though pace of growth should be stronger,” says Roubini. The key economic reform of rolling out Goods and Services Tax (GST), a uniform indirect tax regime has been stuck in the Rajya Sabha, blocked by Congress-led opposition.
Niti Aayog vice-chairman Arvind Panagariya however said that “GST will eventually be passed. If we stay on the reform path there is scope for India to expand and touch double-digit growth in next three years.”
Roubini, professor at the New York University’s Stern School of Business said India must clarify on the retrospective taxation issue to attract foreign direct investment. While Finance Minister Arun Jaitley has promised investors of a non-adversarial tax regime, the retrospective tax provisions still remain in the Income Tax Act. Panagariya flagged that although Indian economy remains in a good shape, exports was a worry.
Indian exports have fell for 13 straight months in December, which Roubini attributed to the relatively sharper currency depreciation in the enraging markets compared to the Indian rupee.
“Exports have been hit by a fall in emerging markets currencies, while Indian currency has remained relatively resilient,” he said. He added that trade openness is improving significantly in India. Panagariya said the rising labour costs in China could lead to some labour-intensive industries moving out from there.
