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

NEW DELHI: Main economic adviser K Subramanian On Thursday it seemed to shatter his predecessor. Arvind Subramanian Affirmation that India overestimated its growth rate, saying that it is very difficult to create a narrative that is different from the truth.

Former CEA Arvind Subramanian in his research paper last month mentioned that India's growth rate 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.

Let me tell you from my own observation that India is an economy where there are many many touch-points for policy and in the six months that I have been part of the government, I have been able to see it from close quarters because there are several touch points for policy, it is very hard to try and create a narrative which is different from the truth, K Subramanian said when asked about raised about the credibility of 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 for 2024-25, he said that investment will be the main driver to boost the economy to the maximum and increase 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 slows down in the economy, while an increase in investment and exports become the new engines of the economy. Indian economy .

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

The CAD, which is the net of foreign currency inflows and outflows, stood at $ 48.7 billion in 2017-18.

K Subramanian said it is important to note that when investment goes up unemployment comes down to the virtuous cycle that kicks in.

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.