India could have achieved over 8% GDP growth without external shocks: RBI Deputy Governor

Reserve Bank Deputy Governor Poonam Gupta on Tuesday said the country’s real GDP growth would have exceeded 8 per cent but for the external shocks over the last three years. Underlining that India has grown at over 7 per cent in an “inconducive environment”, Gupta said that if and when the external environment gets better, up to 1 percentage point will immediately be added to the country’s growth.

Speaking at the annual Business Standard BFSI Insight Summit here, Gupta recalled that we began our journey of growth acceleration with the 1991 economic reforms, and added that a lot of work has gone into various aspects over the years, including strengthening the systems, putting a digital infrastructure in place, states becoming important partners in growth, among others.

“Just based on the strength of that work, we would have already been an 8 per cent growth economy,” Gupta, who handled the monetary policy department at the central bank, said. “If the global environment gets better, another 50 bps to 1 percentage point growth will come just from there,” she added.

Acknowledging that driving growth is not easy, Gupta said a lot of factors need to be internalised to accelerate the growth, including learning from other countries, upping domestic investments and securing foreign direct investment.

In the current environment, she said the fuel and external finance remain a challenge confronting us, and sounded more confident about food despite the impact of the El Nino. “Food is not a challenge; if anything, we are becoming an exporter.

This year is El Nino, but even then it is managed very well,” she said. She said the fiscal policy can help cushion the initial impact of supply shocks through targeted supply-side measures, but they need to be consistent with continued fiscal prudence and overall macroeconomic stability.

“Due to constant policy actions and adaptation, the economy has become less sensitive to some of the shocks that used to impact the economy much more in the past, whether it is the volume of oil used, deficiency in rainfall, etc,” she added.

Not relying excessively on a single stream of economic activity has also proved to be advantageous for India, she said. She also dismissed artificial intelligence’s impact on jobs, saying such a phenomenon has historically never happened and is unlikely to happen with this technological shift as well.

On public finances, she said the differential between the interest outgo due to government borrowing and the nominal GDP growth places India well, and the debt-to-GDP ratio is bound to decline going forward in a business-as-usual perspective.