BT Budget Roundtable: Days of 10% GDP growth are gone, says Finance Secretary

In spite of economic slowdown globally, India is expected to remain a bright spot with over 6 per cent growth in its real GDP (gross domestic product) in FY24. However, the days of 10 per cent GDP growth that economies like India and China had witnessed, are a thing of the past, said T V Somanathan, Finance Secretary, Government of India (GoI).

Somanathan, who was talking at the Business Today Budget Roundtable 2023 in New Delhi, said 10 per cent GDP growth is “not attainable sustainably” given the current macroeconomic situation that prevails globally.

“I doubt we should set a target of 10 per cent (GDP) growth as setting such a target is not realistic (anymore). The period of dramatic growth in global trade that took place between 1995 and 2010 is gone,” he said answering a question on whether India shall set such a target in the near future.

While the global economy is now highly dependent on open trade, the government has increased import duties on several items in the union budget. According to Somanathan, such moves are aimed to encouraging the local manufacturing sector. “Increase in customs duty is a tool that has been used by many countries like Japan and Korea in the past that are now global power houses,” he argued.

Since the COVID-19 pandemic hit the local manufacturing and impacted the global supply chain due to prolonged lockdowns in China, the GoI has launched multiple Production Linked Incentive (PLI) schemes to boost local manufacturing ecosystem. Somanathan today said, some of the PLI schemes, especially the ones for electronics and mobile handsets are yielding results already.

In the last three years, however, the union government’s fiscal deficit has moved away from away from the 3 per cent target laid down in the Fiscal Responsibility and Budget Management Act, 2003. With an aim to bring the fiscal deficit down, the FM has announced that for FY2024 a target of 5.9 per cent has been set. And by FY26, it would be brought down to 4.5 per cent.

According to Somanathan, the current economic realities dictate that the fiscal deficit may remain at that level by FY26.

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