Niki Gokani, IIM Calcutta
Stretching optimism a bit too much
The GDP growth rate cannot change instantly. India's GDP grew 4.5 per cent and 4.7 per cent in 2012/13 and 2013/14, respectively. According to the Economic Survey 2013/14, the growth rate is anticipated to be in a range of 5.4 to 5.9 per cent this fiscal year (2014/15). For quicker growth, low inflation, sustained farm growth, better industrial output, and conducive market conditions for investors are crucial. Many of these, in some way, depend on one another and, more importantly, need policy reforms.
A weak monsoon will likely hit agricultural growth. The expenditure of the exchequer will depend on global factors like crude oil prices, which are unaffected by the wave that seems to be blowing after the formation of the new government. Borrowing from Jim O'Niell, "? There is nothing India can do about these factors.
It just needs to concentrate on what it can control and improve itself."Even after assuming that global factors remain favourable, a growth rate of eight per cent in the next two years might be wishful thinking. This is because, one, the policy paralysis of the previous government will continue to affect for at least this fiscal year, till the new reforms percolate to the grassroots, and two, all the apparent positive sentiment around Prime Minister Narendra Modi, if it capitalises, will take a while to show effect. The Indian economy may be on the track back to glory, but eight per cent in two years is stretching optimism a bit too much.