Indian economy clearly on recovery path: Jaitley

Washington, April 19

Indian economy is now clearly on a recovery path with a 7.4 per cent growth in the first three quarters and the new government is committed to maintain overall macroeconomic conditions on a sustained basis, Finance Minister Arun Jaitley has said.

“We are committed to maintain overall macroeconomic conditions on a sustained basis so that the Indian economy is able to achieve and sustain growth of 8 per cent and above,” Jaitley said in his address to the International Monetary and Financial Committee.

“The Indian economy is now clearly on a recovery path,” he said, adding India’s growth recovered to 7.4 per cent in the first three quarters (April-December) of 2014-15 as compared with 7.0 per cent during the same period of 2013-14.

Advance estimates have also placed the GDP growth for the full year of 2014-15 at 7.4 per cent.

Medium-term growth prospects have also improved following recent policy initiatives towards unlocking coal and other mining activity, liberalisation of FDI limits and a renewed thrust on public investment in infrastructure, which would help to improve the investment climate.

Inflation, which was a major concern for India during 2010-13, has moderated significantly, he said.

CPI inflation, which is now used as the main measure of headline inflation by the Reserve Bank of India (RBI), declined to 5.2 per cent in March 2015 from 11.2 per cent in November 2013, he said.

In terms of the flexible inflation targeting framework adopted recently, going forward, the RBI will seek to bring the inflation rate to the mid-point of the band of 4 +/- 2 per cent, i.e., to 4 per cent by the end of a two year period starting fiscal year 2016-17, Jaitley told the world body.

Noting that India has continued on the path of fiscal consolidation, he said the GFD of the central government, which was 5.7 per cent of GDP in 2011-12, declined to 4.1 per cent in 2014-15 and is budgeted to decline further to 3.9 per cent in 2015-16.

India’s current account deficit (CAD) declined sharply from 4.8 per cent of GDP in 2012-13 to 1.7 per cent in 2013-14 and is expected to decline further to 1.3 per cent in 2014-15.

Reflecting the improved domestic macroeconomic situation as also the continued accommodative global monetary conditions, India has received large portfolio flows in the recent period - much higher than the current account deficit.

This has enabled the RBI to build up its foreign exchange reserves, which are now at USD 343 billion (as of April 3, 2015), up by USD 67 billion from the level at end-August 2013.

“As such, India is now better prepared to deal with global financial market volatility that could arise in the context of US monetary policy normalisation,” Jaitley said.

Stating that India has been placing a special emphasis on financial inclusion, he said in a short span of about eight months, a record number of 147 million bank accounts have been opened under a new scheme (Pradhan Mantri Jan Dhan Yojana).

“The opening of a large number of accounts should also facilitate direct benefit transfers to the beneficiaries and improve public expenditure management,” he said. — PTI