India’s GDP can certainly grow by eight per cent and more, as predicted in the Economic Survey and repeated by chief economic adviser Arvind Subramanian on Wednesday and on Thursday by President Pranab Mukherjee. It would have been enlightening if Mr Subramanian had spelt out how the government aimed to achieve this and what advice he is giving the government.
It would have been more assuring especially since many investors are showing scepticism about the promises of the government. Recently a big fund manager sold all his holdings in India saying he could not invest on hope alone.
Mr Subramanian, too, has admitted the economy is growing slowly and said the pace would pick up as reforms were implemented. He failed to say what reforms. Instead, he introduces a new scare, of deflation, which one finds suspect. One can understand he was making a pitch for a reduction in the interest rate but the deflation scare hardly justifies it.
One does not agree with him when he says the RBI should not concentrate on the consumer price index alone but must take into consideration the wholesale price index when deciding the interest rate. Perhaps Mr Subramanian has overlooked the fact that a household buys not at the wholesale level but at the retail, where prices are much higher. It was Dr Raghuram Rajan who corrected this anomaly.
