New CEA, Arvind Subramanian Throws Light on Indian Economic Picture and Bottlenecks

Oct 26, 2014 Tushita News 0

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Recognising the fact that private investment is muffled in India due to ‘lots of regulations’ and also the shortage of electricity and coal, Arvind Subramanian, the new Chief Economic Adviser has said that it is very crucial to get rid of these bottlenecks, for kick-starting growth in the country.

“The Indian economy needs a couple of big things, better governance, a stronger state delivering security of contract, protecting property rights, providing infrastructure,” said Dr. Subramanian in a podcast interview to IMF.

The former IMF economist, who has recently been appointed as the Chief Economic Advisor in the Finance Ministry, said, “You need a bigger role for the private sector, means getting rid of the lots of regulations that stifled the private sector, which stifled employment creation that stifled the ability of the private sector to grow, to become big. These are the kind of broad twin challenges that India faces.”

In response to one of the questions, he said “a lot of projects are stalled, because there is not enough power, there is not enough coal, or the companies are over indebted.”

“So clearing these bottlenecks is going to be the biggest kick start to private investment and growth,” he added.

He also went on to add that bureaucrats were avoiding some decisions as they feared that they could be sued in courts.

He said, “So I think, just creating the conditions for more expeditious decision making and then you need to get the infrastructure going again, making power and coal and addressing those would be a big priority.”

The new CEA of India said that a growth rate of 5% is ‘remotely not enough’ for the country to develop and provide employment for the mounting labour force.

He said, “Growth would have to be brought back to seven-and-a-half and eight per cent consistently for about 10, 15, 20 years, if India is to really address all these challenges.”

Dr. Subramanian also said, “As reforms were lagging, inflation was very high and growth decelerating for many consecutive quarters and there seemed to be a kind of government paralysis, there was a sense in 2012 of India lagging behind.”

“But it is clear that there is a real optimism, because there is a sense that the new government can remedy some of those problems. Stock markets have risen tremendously; foreign capital has come pouring in and initial steps have been taken that kind of validate all that optimism,” he further added.

He further said, “But that is just a start. A lot more needs to be done,” explaining how the Modi Government is trying to implement the ‘Gujarat model’ all over the country, and how it is helping in encouraging good governance and attracting private sector

He laid stress on the fact that there is a huge heap of macro challenges, which need to be addressed for getting the fiscal deficit down and for pulling down inflation further.

He was also of the view that at the same time, it is also important to arrange for conditions suitable for greater infrastructure and give instigation to conditions to invite the private sector back into the economy.

Dr. Arvind Subramanian, an economist with the International Monetary Fund (IMF) and an Oxford student, like his predecessor Raghuram Rajan said private sector investment needs to rise again if India really aspires to achieve eight per cent growth rate.

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• Arvind Subramanian, CEA, chief economic adviser, Dr. Arvind Subramanian, imf

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