CEA rejects the assertions of Arvind Subramanian, says difficult to create a wrong narrative

New Delhi, July 4 () The chief economic adviser, K Subramanian, on Thursday, seemed to dishonor his predecessor, Arvind Subramanian, who claims that India overestimates his growth rate and says it is very difficult to create a narrative that is different of the truth.

The previous CEA Arvind Subramanian in his research work last month mentioned that the growth rate of India between 2011-12 and 2016-17 was overestimated.

He argued that methodological changes in the calculation of GDP had led to overestimate GDP growth by at least 2.5% per year between 2011-12 and 2016-17.

Allow me to tell you from my own observation that India is an economy where there are many points of contact for politics and in the six months that I was part of the government, I could see it from nearby places because there are several points of contact for politics, it is very difficult to deal with to create a narrative that is different from the truth, said Subramanian when asked about concerns about the credibility of the data.

He also said that there are many indicators that contradict the claims of critics of the credibility of the data.

Noting that sustained growth of 8 percent is required to achieve a $ 5 trillion economy by 2024-25, he said that investment will be the main driver to boost the economy to the top and boost job creation.

Investment can not increase unless the cost of capital decreases. A key opportunity we have is that the cost of capital at the international level is very low, liquidity is very high there and, as a result, there is an opportunity for both companies and the sovereign. Well think about going and raising money abroad, he said.

The government is also thinking of liberalizing foreign investment rules to further boost investment, he said.

The government is expected to further ease foreign direct investment (FDI) regulations with a view to reducing the expansion of the current account deficit (CAD), according to the Economic Survey 2018-19.

He said that, from a macroeconomic perspective, the deterioration of the EAC can be contained if consumption is slowing in the economy, while an increase in investment and exports become the new engines of the Indian economy.

The CAD increased to USD 57.2 billion or 2.1 percent of gross domestic product (GDP) in 2018-19, compared to 1.8 percent the previous year.

The CAD, which is the net of foreign currency inflows and outflows, remained at USD 48.7 billion in 2017-2018.

Subramanian said that it is important to bear in mind that when investment increases, unemployment decreases due to the virtuous cycle that begins.

When the economy is in a virtuous cycle, investment, productivity growth, job creation, demand and exports feed on each other and allow animal spirits in the economy to prosper. In contrast, when the economy is in a vicious circle, the moderation in these variables are cushioning each other and, therefore, dampen animal spirits in the economy, he said. As we describe in the next section, our view of the economy, whether in a virtuous or vicious circle, with investment as the key driver of this cycle, stems from two key deviations from the traditional Anglo-Saxon view of the economy. he said. BKS DP ANZ MR

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