India has all the requirements to return to a GDP growth rate of 8% in the coming years, Deputy Chairman of the Planning Commission Montek Singh Ahluwalia said, while highlighting that current account deficit is a big problem right now.
"India has averaged 7.5% growth in the last 10 years. It should have done that for 15 years but it is possible to bring it back to the average performance of the last decade. The target for 2013-14 is 6.5-7% and then accelerate further. India has all the requirements to return to 8%, even if it is later than expected," he told a gathering of students and academics at Oxford University.
"A little over 5% is a slowing down but the whole world is experiencing a slowing of growth. It is a worry because we expect much more but it is not as big a disaster as the media makes it out to be. Growth is important but that growth has to be inclusive and sustainable," Ahluwalia said last evening.
India's leading economic strategist also stressed that the pace of poverty reduction in the country was within the target set by the government.
"It is clear that the government knows how to get growth going but there is a perception that we lag behind on inclusiveness. It is something the government takes very seriously and latest data indicates that the pace of poverty reduction has increased. The extreme view that the rich are getting richer and the poor are getting poorer is nonsense. There is a lot of good news in terms of the pattern of growth being more inclusive," he said.
The former alumnus of the University of Oxford, who was invited by the Blavatnik School of Government to speak about 'India's Challenges Ahead', was in the UK on his way back from the G-20 Sherpas Meeting in Moscow.
"The state of the world economy is a challenge. The focus of government policy is to re-assure foreign investors that India is wide open for business. India has the human resources in place and an expanding private sector. The only problem is the current account deficit. But the global financial system appears to be stabilising and the most important message is that India is a good bet for foreign investment and that message is getting across," he said.
Ahluwalia also said that there is a good chance that Vodafone dispute will be resolved soon.
"The Vodafone case did not do us any favours. My personal view is that they knew very well that it (Vodafone's purchase of the Indian operations of Hutchinson Whampoa in 2007) was chargeable to tax, but they decided to take a calculated risk. The finance minister (P Chidambaram) is in negotiations to come up with a reasonable compromise and there is a good chance we can put this behind us for good," Ahluwalia said yesterday while admitting that the $2-billion Vodafone tax dispute had affected global perceptions about the country.
Ahluwalia also described the Supreme Court's decision to cancel the 2G telecom licences last year as a "blip" that would lead to clear and transparent rules for the sector.
"The telecom story is a good one. It is sectors like energy and water that will prove crucial in terms of ensuring sustainable growth. It just takes a long time in India but in the next few years, the huge debates will centre around an intelligent use of national resources, which will require intelligent regulations and pricing in both these sectors," he said.