India expected to see 7% growth next fiscal: CEA

Chief Economic Adviser K V Subramanian on Wednesday said India is expected to hit a growth rate of 6.5-7 per cent in 2022-23 and accelerate further to 8 per cent in the subsequent years on the back of reforms undertaken by the government.

He also said the government is expected to meet the fiscal deficit target of 6.8 per cent in the current fiscal despite pressure on revenue collections.

"Our projection is that from FY'23, we should be hitting a growth of 6.5-7 per cent... accelerating from there onwards hitting between 7.5 and 8 per cent as the impact of all these reforms is felt both on the investment rate, which will start touching 40 per cent, and the incremental capital output ratio, basically productivity, which will also improve," he said.

IMF has projected a growth rate 8.5 per cent for the next financial year, he said while addressing a virtual event organised by BASE University.

The International Monetary Fund (IMF) on Tuesday cut its economic growth forecast for India to 9.5 per cent for the fiscal year to March 31, 2022 as the onset of a severe second COVID wave cut into recovery momentum.

This forecast for 2021-22 is lower than the 12.5 per cent growth that IMF projected in April before the second wave.

For 2022-23, IMF expects economic growth of 8.5 per cent, higher than 6.9 per cent it had projected in April.

Subramanian said the supply-side reforms undertaken by the government in sectors such as agriculture, labour, export PLI scheme, change in MSME definition, creation of the bad bank and privatisation of public sector banks, among others, are going to push growth in the future.

Besides, he said, linking of reforms to additional funding by the Centre to states would encourage them to undertake reforms that will push growth.

The Economic Survey 2020-21, released in January this year, had projected a GDP growth of 11 per cent in the financial year ending March 2022.

The Survey had said growth will be supported by supply-side push from reforms and easing of regulations, push for infrastructural investments, boost to manufacturing sector through the Production-Linked Incentive (PLI) schemes, recovery of pent-up demand, increase in discretionary consumption subsequent to rollout of vaccines and pick up in credit given adequate liquidity and low interest rates.