Expect FY18 growth to be higher than Moody's forecast: Subhash Garg

Subhash Garg, Economic Affairs Secretary
Economic Affairs Secretary SUBHASH GARG said the ratings upgrade was an affirmation of the reforms carried out by the Centre. Speaking to Arup Roychoudhury, Garg said he was expecting GDP (gross domestic product) growth for FY18 to be higher than Moody’s projection of 6.7 per cent, and that there might be a slight deviation on the path to a three per cent fiscal deficit. Edited excerpts:

India has a ratings upgrade after nearly 14 years. Your reaction?

This is clearly an affirmation of the structural reforms the government is undertaking. This is an acknowledgement that these steps will make India’s growth story far more credible.

The ratings upgrade does make India’s debt more attractive. Does it give the Centre the impetus to borrow more?

This does not affect any decision by the country to borrow more or less. The need to borrow and the extent of borrowing are related to our assessment of the fiscal consolidation path.

Moody’s said the measures undertaken would foster sustainable growth. What kind of growth rate can be classified as sustainable growth?

In various forums, the government has expressed that we should have at least 8 per cent growth for a long period of time. That is what will raise the economy to a very high growth level — to the upper-middle income group. The government cannot design a particular number. It is the result of what is happening in the real economy. A number of indicators, which have come for the July-September quarter, have shown that there has been a turnaround.

Moody’s sees FY18 growth at 6.7 per cent and FY19 at 7.5 per cent. Do you agree?

I would expect somewhat higher growth for 2017-18 than what Moody’s is projecting. As the International Monetary Fund and others have said, very soon India can achieve an 8 per cent growth trajectory. I am interested in the second quarter GDP numbers. If it turns out to be more than 6.5 per cent, then that assures us that the remaining three quarters might lead us somewhere closer to 7 per cent for the year.

The fiscal situation is still a challenge. Moody’s has accepted that and so has Standard & Poor’s.  What can we expect on the fiscal front this year?

This year has been very different from a normal year. The impact of the reforms undertaken, including of the goods and services tax, have to be assessed. Only then will we have a better picture on where we stand. All these measures are so intertwined that a number of things get affected.

The government’s commitment on medium term is very clear. You started with 4.5 per cent and aim for 3 per cent. There might be some deviations. Even if you have to make a slightly larger borrowing, it does not make financing that difficult. I am not saying that that is the likely outcome. We will leave that to the later part of this year.

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