Good monsoon may push growth to 8.5%: Jaitley

Hopeful of lower interest rates if inflation continues to cool down

Finance Minister Arun Jaitley on Monday said the government might revise its projection of economic growth in 2016-17 to 8-8.5 per cent from 7.5 per cent, if the monsoon rainfall was above normal.

Interacting with foreign institutional investors in New York, Jaitley expressed confidence that the Constitution amendment Bill on the goods and services tax would be cleared by the Rajya Sabha and said a joint committee was likely to submit its report on the bankruptcy Bill soon.

The Economic Survey had projected the economy would grow by 7.25-7.75 per cent in 2016-17. The International Monetary Fund had, earlier this week, pegged India's economic growth at 7.5 per cent for 2016-17.

After two consecutive droughts, the India Meteorological Department said last week that monsoon rainfall was likely to be above normal at 106 per cent of the long-period average. Rainfall is also likely to be fairly even across the country. Queried on Reserve Bank of India Governor Raghuram Rajan's remarks last week that India seemed to be a 'one-eyed king in the land of the blind', Jaitley said at 7.5 per cent growth rate, any other country in the world would be celebrating but it is a tribute to India's growth story that "we are still impatient because we know that our potential is to do distinctively better."

In his meeting, Jaitley also pointed out the political climate did not allow the government to reduce its holdings in state-owned banks to below 51 per cent. He was hopeful of lower interest rates if inflation continued to cool down and the monsoon rainfall was good. "If this trend of containing inflation continues, we can hope for a better interest rate regime, which, in turn, will have a spiralling effect on improving productivity," he said.

Jaitley acknowledged stretched bank balance sheets, excessive corporate borrowing, over-extended capacity, a demand slowdown and global headwinds had contributed to weak private sector investment.

He said stressed bank assets were concentrated in the steel, power, infrastructure, highway, textile and sugar industries, and the government would tackle them sectorally.

In another address at the Asia Society in New York on Monday, Jaitley said the government had its hands full in bringing about structural changes and implementing key reforms to boost economic growth.

MACRO: FM-SPEAK

• Slow capex: Stretched bank balance sheets, excessive corporate borrowing, over-extended capacity, demand slowdown, global headwinds contributed to weak private sector fixed investments
   
• Banking system NPA: Stressed assets are largely attributable to six sectors - steel, power, infra, highway, textile and sugar - and Centre intends to tackle the same on a sectoral basis
   
• PSU bank stake/consolidation: Centre will look at reducing stake in PSU banks to 52%, once the financial health of the banks is restored
   
• Interest rates: If this trend of containing inflation continues, Centre can hope for a better interest rate regime, which, in turn, will have a spiralling effect on improving productivity