Economy may grow by over 6.5% in FY18 as inflation eases: Arvind Panagariya

Reversing a 5-quarter slide in GDP growth, the economy bounced back from 3-year low to expand by 6.3% in July-Sept

Noted economist and former vice-chairman of NITI Aayog Arvind Panagariya expects the economy to grow by over 6.5 per cent in the current financial year.

He said the macroeconomic indicators have remained stable for the past three years with current account deficit hovering around one per cent and inflation moderating.

"Expectations of implementation of the goods and services tax (GST) beginning July 1, 2017 led to some disruptions in supply during the April- June quarter with the quarterly growth rate declining to 5.7 per cent," Panagariya said.

"But we should see recovery coming our way with the growth rate during 2017-18 reaching 6.5 per cent or higher," he said.

Panagariya pointed out that a recently released Goldman Sachs report makes a plausible case that the economy will accelerate to 8 per cent growth in 2018-19.

Reversing a five-quarter slide in gross domestic product (GDP) growth, the Indian economy bounced back from a three-year low to expand by 6.3 per cent in July-September as manufacturing revved up and businesses adjusted to the new GST tax regime.

On whether the government could relax fiscal deficit target to boost the economy, Panagariya said: "Personally, I do not believe that the Finance Minister and the Prime Minister would let their hard-fought success in achieving significant progress in fiscal consolidation slip past them at this late stage in the game."

When asked whether the Modi government would go populist in its last regular Budget to be presented in February next year, Panagariya said he hoped that populism, if any, takes the form of one-time sops and not long-term programmes that are against national interest and politically risky to withdraw afterwards.