New Delhi: India’s fastest growth in over two years shows the economy is recovering, Finance Minister Arun Jaitley said on Saturday, adding the robust expansion would help the government meet its ambitious fiscal deficit target.
India’s economy grew by a forecast-beating 5.7 per cent in the first financial quarter, its best pace since early 2012, according to official data Friday, as the election win of the Bharatiya Janata Party in May spurred business confidence.
The right-wing government’s moves to accelerate bureaucratic decision-making and make it easier to do business are already paying dividends, Jaitley said.
“With the long-term impact of all these new initiatives setting in, I’m sure the impact in coming [financial] quarters will be much larger,” Jaitley told reporters in New Delhi.
India’s economy posted two years of sub-five per cent growth, staggering under high interest rates to curb stubborn inflation, a weaker global economic backdrop and a fall in foreign investment as corruption scandals embroiled the previous Congress government.
The performance marked India’s longest slowdown in a quarter-century.
But Jaitley forecast growth this financial year to March 2015 would pick up to 5.7-5.9 per cent, despite weak annual monsoon rains that are vital to the farm sector, after the economy grew by 4.7 per cent last year.
Some economists say six-per cent-plus growth may be achievable this year in light of the quarterly figures after earlier forecasting around five-to-5.5 per cent expansion.
Economists say India needs at least eight to nine per cent growth to create jobs for its ballooning youth population.
Jaitley also said he was far more confident of reaching a fiscal deficit target for this financial year of 4.1 per cent of gross domestic product from 4.5 per cent the previous year.
The deficit target inherited from the Congress government had been called a poison chalice by some economists with weak tax revenues and high government subsidy spending make the goal tough to achieve.
But stronger growth makes it easier for the government to realise its promise of slimming the budget deficit — the gap between spending and revenues — to a seven-year low.
“With the first-quarter (growth) results, it [the deficit goal] is something that’s certainly achievable,” Jaitley said.
