A worker grinds a tri-bolt lock component (Photographer: Udit Kulshrestha/Bloomberg)

New NITI Aayog Head Rajiv Kumar Sees 7-7.5% GDP Growth In Second Quarter

The Indian economy is likely to grow at least 7-7.5 percent in the July-September quarter with the initial Goods and Services Tax-related disruption out of the way and improving macroeconomic factors, NITI Aayog new Vice Chairman Rajiv Kumar said on Friday.

“Restocking has started, there is clarity over GST, forecast of monsoon has been good, there are many IPOs in the capital market...services sector will also grow,” Kumar told reporters in New Delhi, addressing his first press conference after assuming office.

Demonetisation had no role in the slowing growth for the first quarter, Kumar said, echoing the views of Finance Minister Arun Jaitley and Economic Affairs Secretary Subhash Chandra Garg. The slump was on account of GST-related destocking, manufacturing slowdown and WPI deflation, he added.

“Demonetisation was a six to eight week phenomenon from November 8-December 30...When you say that April-June GDP growth has declined because of demonetisation, that is completely incorrect,” he said.

Impact Of Farm Loan Waiver Worrisome

The impact of farm loan waivers on state finances is worrisome, Kumar said.

“We will engage (with states) just to say that farmers distress is a real phenomenon and not imaginary, and the root of the problem is to improve the living and level of productivity of farmers,” he said.

The country needs strong policies and not populist measures like waivers to address the distress in the agriculture sector, NITI Aayog Member Ramesh Chand who was also present the conference, added

“If you look at institutional loans given to farmers they form a very tiny percent...if you look at the NSSO survey, 40 percent farmers take loans, out of those 40 percent, 40 percent take loans from private persons, and only 60 percent of them take loans from institutions, out of those some people always repay loans,” Chand said, adding that waiving loans do not solve problems of all problems.

On Thursday, RBI Governor Urjit Patel had said that loan waivers not only impact bank balance sheets but also increase government spending which is then financed by additional market borrowings, pushing up the interest rate.