The government after struggling to keep the inflation under control has now pointed deflation as new challenge for the economy, though expressed hope that the economic growth will be close to 8% in the current fiscal year, despite lower first quarter GDP number. Chief Economic Advisor (CEA) Arvind Subramanian has said that one real challenge that looms ahead is not to be the price inflation but appears to be a possible price deflation. The wholesale price index has been in the negative zone since November 2014, while the retail inflation (CPI) too has fallen sharply in last couple of months.
Subramanian further stated that “the economic growth is moving in the right direction, although its pace is still below what the economy needs... But at a pace that is expected to pick up in response to the ongoing reforms”.
Talking about the below-than-expected first quarter economic growth of current financial year, Subramanian said, the numbers indicated that 'economy is recovering' and is consistent with the other more high-frequency indicators such as revenue collection and real credit growth. April-June 2015 quarter saw economic growth at 7%, lower than the 7.5% notched up during the previous quarter.
In the first four month of current fiscal (April-July), the indirect tax collection had registered an increase of 37% and after discounting for fresh initiatives, the growth worked out to be 14.6%. CEA said that if the revenue maintains at this pace, it is quite likely that the GDP growth numbers will be higher, may be even substantially higher than what was suggested by the latest numbers.