GDP growth of 8% achievable in 2-3 years following path of fiscal prudence: Chidambaram

GDP growth of 8% achievable in 2-3 years following path of fiscal prudence: Chidambaram

Sep 24,2014   10:30 Hrs IST

Former Finance Minister P Chidambaram said that India could achieve 8% growth in the next 2-3 years if it followed the path of fiscal prudence, which could be financed by domestic savings and some foreign direct investment. However, he underscored that growth beyond 8% would bring its own set of problems as it is bound to become inflationary, which will exacerbate fiscal deficit. It would lead to additional borrowing, which in turn would enlarge twin deficits, i.e. fiscal deficit and Current Account Deficit (CAD). Further, Chidambaram emphasized that if the government continued to remain on the path of fiscal prudence, promotes savings and investments, and be more diligent in implementing projects, it would be possible to get back to 8% growth. The Indian economy grew by 4.9% in 2013-14 fiscal. However, in the April-June quarter, the growth picked up to 5.7%. Notably, the country clocked an enviable 9% growth during pre- global financial crisis in 2008. Also, he highlighted that the key to control inflation was to contain fiscal deficit, which the government aims to bring down to 4.1% in the current fiscal from 4.5% in 2013-14. The minister pressed upon the need for financial sector reforms to achieve 8% growth. It added that FSLRC (Financial Sector Legislative Reforms Commission) had made far reaching recommendations, some are legislative, some are non-legislative in nature and the Non-legislative recommendations should be carried out over a period of next 2-3 years. The minister also lauded the Modi government's decision to do away with the Planning Commission and suggested to put in place a small body of not more than 100 people in its place, who could do prospective planning, and lay out the future roadmap.