After hitting a six-year low in September quarter last year, the Indian economic growth is set to bounce back, Sanjeev Sanyal, Principal Economic Adviser, Union Ministry of Finance told global news agency Reuters. The growth will be driven by the investment and consumer demand-inducing policies of the government, Sanjeev Sanyal also said. The economic slowdown has mostly bottomed out and here on out, the economy will grow, he added. The Insolvency and Bankruptcy Code (IBC), banking sector reforms and corporate tax reductions will propel the growth of the country, Reuters further quoted Sanyal as saying. The growth rate in the financial year 2020-21 would be 6%, as against the growth estimate for current fiscal at 5%, he added.
Introduced in May 2016, IBC was brought in as a solution to the problem of NPAs. It helped banks recover the amount in outstanding corporate loans so that the amount could be lent to new borrowers. While the government adviser paints an optimistic picture, private economists are a little apprehensive. They said that the dip in growth might continue for a few quarters due to lesser private investments and lukewarm consumer demand.
Global brokerage Nomura has predicted the Indian economy to grow at 4.7% for the current fiscal year and 5.7% for the next. However, Sanyal dismissed these estimates. He added that his estimates factored in the early signs of recovery in the manufacturing sector and an increase in consumer demand. He further said the Centre is also expecting the average consumer price inflation to decrease to 4% in fiscal 2020-21. There was a recent steep increase in inflation, driven largely by food prices.
Sanyal also said that Budget 2020 offered various tax incentives for sovereign wealth and insurance funds, leaving more banking funds for private companies despite higher state borrowings. On Tuesday, Union Finance Minister Nirmala Sitharaman also told the Parliament that the Indian economy was on its way to recovery. Several experts have been expressing concern about the economic slowdown that the country is witnessing off late, with IMF chief Gita Gopinath saying that the slowdown of India is pulling down the world economy.