India’s slowdown has bottomed out: Panagariya

New Delhi: Former Niti Aayog Chairman Arvind Panagariya has said that India's slowdown has bottomed out and now the economy needs to be opened up if the country wants to realise the ambition of 10 percent growth rate. The statement comes barely a week after the RBI MPC members said at a meeting that the Indian economy hasn't bottomed out yet.

While delivering the keynote address at a discussion on Union Budget 2020 organised by India's Consulate General in New York in partnership with the US-India Strategic Partnership Forum (USISPF) on Tuesday, Panagariya said that in FY2020-21, India's GDP growth is expected to be 6 percent and will get back to 7-8 percent which has been the case in the last 15-16 year period.

'India's slowdown should see some recovery in H2 of FY21'

"On the slowdown, my own assessment is that we have bottomed out," Panagariya, a Professor of Economics at the Columbia University, said. "In the second half of the current fiscal year, which would be ending on March 31, we should see some bit of recovery, not a big one but certainly the second half (of the fiscal year) should look better than the first half," he said.

The former Niti Aayog Chairman said that since 2003, India has been growing at an average rate of about 7 percent and the first five years of the Modi government was characterised by a 7.
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5 percent growth on average.

What led to the slowdown?

While noting that the Indian economy "can do a lot better no doubt," Panagariya said that the main factor that led to the slowdown has to do with the financial markets that translated into a weakening of the balance sheets of both banks as well as corporates.

"I think you could criticise the government here for being a little slow in beginning the process of cleaning up of the bank Non-Performing Assets (NPAs). The problem was known actually by 2013… but this particular problem of NPAs never gets solved very quickly," he said. However, he also sounded an optimistic note when he said that as clean-up happens, "We should see the growth returning."

Panagariya welcomes positive steps

Commenting on the Budget, Panagariya welcomed the positive steps taken by the government, including on fiscal consolidation, fiscal deficit, corporate tax reduction, initiation of simplification for the personal income taxation as well as privatisation.

However, he flagged one "negative" in the budget — that for the last 2-3 years, India is turning more and more towards import substitution.