Can India become a $10 trillion economy by 2030? Economic Affairs Secretary Subhash Chandra Garg is the latest to join a long line of believers, including Reliance Industries chairman Mukesh Ambani, Commerce and Industry Minister Suresh Prabhu, and Rana Kapoor, MD and CEO, YES Bank. Addressing the 6th Growth Net Summit, convened by Ananta Centre, Confederation of Indian Industry and Smadja & Smadja earlier this week, Garg said, "It is a plausible aspiration for India to become a $10 trillion economy by 2030". He reportedly added that a "sustained" average growth of 8% coupled with an assumed devaluation of Indian rupee vis-a-vis US dollar by a rupee per year would likely take India to the stated target.
Given the depreciating rupee, the outflow of portfolio investments and the high oil prices, experts have voiced concerns that the current account deficit (CAD) might rise in the current fiscal. CAD, which is the difference between the inflow and outflow of foreign exchange, jumped to $48.7 billion, or 1.9% of GDP, in 2017-18, up from 0.6% in the previous fiscal.
However, according to Garg, CAD at even 2-2.5% won't be "a problem" for India. "If there is stability, in the current year capital account [inflows] should be good enough to take care and we may not worry even if it [CAD] reaches 2.5%," he said at a CII event, adding, "Last year, we had $160 billion of trade deficit, $82 billion services surplus and $70 billion remittances. In a way, we are pretty much in balance. But if oil goes up, this balance gets disturbed and the capital account funds it." The price of Indian basket of crude surged from $66 a barrel in April to around $74 a barrel at present.
Asked about monetary policy tightening by the United States, Garg said India can afford to be "less edgy and concerned" than it was during Taper Tantrum in 2013. "In the last couple of years of monetary easing, you did not see flood of capital flows coming into emerging markets, including India. Unlike what happened in 2007. There is a confidence that the emerging market economies will do well," he explained. While maintaining that the government needs to be "very careful and watch out" for the situation, he claimed that the country is now "at a place where we can manage without having the consequences of what we saw in Taper Tantrum".
He added that India has a number of other instruments to tackle the situation. "We have not called upon them to use so far. Last time we came out with NRE (non-resident external) deposit. We are sitting on reserves which are highest ever at $415 billion," he said.
On managing fiscal deficit, Garg said the government has worked in a very prudent and sound manner. India would shortly achieve the targeted 3% fiscal deficit level and it will be more permanent and sustainable in nature.(With agency inputs)