Despite global and structural challenges, India will continue to grow in the 7-7.5 per cent range in the next few years, one of the highest growth rates in the world which could further go up by at least 1 per cent through reforms designed to address structural problems, the Prime Minister's Economic Advisory Council (EAC-PM) said on Friday.
It also strongly felt that there should be no deviation from the fiscal consolidation target even as it made a case for continued emphasis on social sector interventions.
The advisory panel, headed by NITI Aayog Member Bibek Debroy, held a stock-taking meeting on the state of the economy and noted that the macro-economic fundamentals of the economy were sound, despite challenges "several of which are structural in nature".
"While the prospects for world economic growth do not look very promising, particularly in the advanced economies, there is sufficient amount of growth momentum in emerging market economies. India is not insulated from global developments. Nevertheless, India's growth is expected to be in the 7-7.5 per cent range in the next few years; one of the fastest in the world," the Council said in a statement.
"However, with reforms designed to address the structural problems, growth rates can easily be enhanced by at least 1 per cent," it added.
The panel said that amongst the challenges that need to be addressed are reforms in the agricultural, banking and MSME sectors, skill development, credit issues and digital payments.
It commended the government and the RBI for "sound macroeconomic management" which it said should continue.
Among the issues discussed by the EAC-PM were agricultural problems, investment trends, fiscal consolidation, interest rate management and credit and financial market issues. The Council felt that the exchange rate management of the rupee by the RBI had been sound despite the volatility in the price of crude oil.
"The good news is that oil intensity (use of fossil fuels as a percentage of GDP) is showing a declining trend," it said.
"There are indications that financial savings have started going up and there is credit up tick through private banks to the services sector. The reforms in the financial sector should be strengthened further building upon what the government is already doing," it added.
The Council felt that the challenge of insularity being seen in external trade should be reversed through supportive policy interventions because there was a positive turn in exports that was now visible.
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