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  3. 8-8.5% growth projected in Budget 15 more statistical and not real: CEA

8-8.5% growth projected in Budget 15 more statistical and not real: CEA

04 Mar 2015 Evaluate

Chief Economic Adviser (CEA) Arvind Subramanian underscored that the ambitious 8.1-8.5% economic growth projected for the next fiscal in Finance Minister Arun Jaitley's Budget is more like a 'statistical and not a real number”. The minister highlighted that to achieve a particular growth rate, it was important to estimate tax revenue, which are just not fanciful assumptions, but solid achievable figures.

However, the minister highlighted that the government expects 15.8% growth in revenue collection this year and that this number was very much achievable and that with the growth rate of 8-8.5%, one should view the economy as “recovering economy” and not “surging economy”.

He highlighted that “8.5%” growth figure was 'directionally' fine since there was an uptick in the growth rate from 2013-14 to 2014-15. On being questioned about credibility of the economic growth projection, Finance Minister highlighted the budget was based on projections about nominal GDP growth, which is the sum of real GDP growth and inflation.

Before the (revised) numbers came out, he highlighted that the government was expecting a nominal GDP growth of 11.5%, broadly which was about 6.5% of GDP growth and 4.5% on inflation. However, the minister highlighted that with the release of new numbers though real GDP growth had gone up, the inflation numbers had actually come down. And hence, relevant numbers used for tax revenues and tax revenue projections remained same as before. So in that sense, for the revenue projections the new statistical numbers did not make difference.

Lastly, on bank recapitalization, Subramanian highlighted the government has allocated about Rs 8,000 crore, which has been linked with performance and the government could further dilute 52% its stake if it requires more money.

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