New Delhi, Nov 30: India has standardised itself for a seven-eight per cent growth rate on the back of improving macroeconomic fundamentals and it will need Rs 50 lakh crore in investments in the next five years, Finance Minister Arun Jaitley said on Thursday.
“India has standardised itself ordinarily for a growth rate between seven to eight per cent. If it slows down, it is more towards seven (per cent) and if it paces up it is more towards eight per cent growth. It’s already close to $2.5 trillion economy in terms of GDP,” he said while delivering a lecture in New Delhi.
Speaking at the HT Leadership Summit, he said India has done well by growing at seven-eight per cent during the past three years. However, scaling up to a 10 per cent rate was “very challenging” and it would not depend on domestic factors alone, but also on how the world was moving, he said.
Jaitley added that reaching double-digit growth would need a boom period.
Noting that the funding requirement for infrastructure in the country is huge, he said that the sector needs investments of Rs 50 lakh crore over the next five years.
“One of the great challenges which remained in India and that directly impinges on the creation of world-class infrastructure is that India was largely a tax non-complaint society,” Jaitley said.
India has spent Rs 60 lakh crore on infrastructure during 2007-17. In recent time, the government has increased infrastructure spending, the finance minister said, adding that Budget 2017-18 made an allocation of Rs 3.96 lakh crore for the sector.
Speaking about the Goods and Services Tax (GST), the finance minister said, “Earlier, there used be an effective tax rate of 31 per cent, we temporarily parked them at 28 per cent and have now started rationalisation ahead of schedule.” He added that future rationalisation of GST rates would depend on revenue collections.
He also said that items under the 28 per cent GST slab would be limited to demerit and luxury goods, adding that the government had tried to keep inflation pressure away by rationalisation and multiple rates.
The finance minister also said that if the government had come up with low GST rates initially, it would have had an inflationary impact.
Observing that the country has moved away from the old era of double-digit inflation, he said, “Our statutorily fixed target is four per cent. We have been able to keep our current account deficit under control, and over the last few years, India has had exemplary performance in terms of being able to bring down its fiscal deficit,” he said.
The net effect of all these things is that India is getting closer to a situation where the country can spend what it earns, and borrows relatively less, he said.
Jaitley said that each of the government’s reforms had a particular direction and that structural changes in the economy had been implemented.
India intends to follow the glide path as far as the fiscal deficit is concerned, the finance minister, who is scheduled to present his last full Budget in February ahead of the next general elections in 2019, said.
“The last three years, we have an exemplary record as far as maintaining that glide path is concerned. We intend to move on that track,” Jaitley said.
India aims to trim the fiscal deficit to 3.2 per cent of gross domestic product in 2017-18 compared with 3.5 per cent in the previous year.
Stating that unlike in developed countries, the small and medium enterprises (SMEs) and the informal and unorganised sector generate a chunk of employment in India, Jaitley said, “One of the areas where we will concentrate is small and medium scale as well as the informal sector.”