Indian economy will expand close to double digit in the current financial year and will likely grow by 7.5-8.5% thereafter for a decade, finance minister Nirmala Sitharaman said on Tuesday during a conversation at Harvard Kennedy School.
She said her observations are based on growth projections of the World Bank, IMF and rating agencies and that ministry of finance has not done any assessment as yet about the growth number.
On Tuesday, the International Monetary Fund (IMF) retained India’s gross domestic product (GDP) growth forecasts at 9.5% in FY22 and 8.5% for FY23. The Reserve Bank of India has also maintained its GDP growth target for FY22 at 9.5%. Global rating agency Moody’s expects India’s real GDP growth rate to be 9.3% in FY22. India’s GDP grew 20.1% in the June quarter from a year before, giving the illusion of a sharp economic recovery, but it was largely driven by a deeply-contracted (-24.4%) base.
In the interaction moderated by former US Treasury Secretary Larry Summers, Sitharaman said India’s economic growth would be somewhere between 7.5% to 8.5% in FY23. “I expect that to be sustained for the next decade because of the rate at which expansion in core industries is happening, the rate at which services are growing, I don’t see a reason for India to be any way lesser than in the next coming decades,” she said.
India’s eight core industries grew by 11.6% in August compared with 9.9% in the previous month even as the low base effect has started to peter out. According to IHS Markit India Services Purchasing Managers’ Index survey, services sector activity in India continued to remain strong at 55.2 in September despite a small fall from August (56.7).
When asked about how India will sustain growth of 8%, a historical rarity, her medium and long term vision of where that growth is going to come from, Sitharaman said investors are looking for destinations where certain assumptions can be taken up – rule of law, democracy, transparent policies and assurance that the country is with a broad global frame of things. All these are factors that helped India to attract industries to set up businesses.
With India’s growing middle class with purchasing power ability offers an opportunity to investors to produce in India for the the large captive market.
“So, I see every reason to believe that this 7.5% to 8.5% growth is absolutely sustainable for the next decade,” the minister said.