Cautioning that the Indian economy is sending mixed signals, Chief Economic Advisor Arvind Subramanian today said the future outlook is challenging as private investments remain weak and government expenditure is set to increase.
However, stressing that the macro-economic situation is "robust and stable" and GDP growth forecast of 7-7.5 per cent is still the highest in the world, he said, "India is both a heaven of stability and outpost of opportunity".
"The economy is recovering but it's hard to be very definitive about the strength and breadth of the recovery for two reasons -- economy is sending mixed signal and second there is some uncertainty how to interpret GDP data," he said.
About the signals, he said that while personal consumer loans are growing rapidly at 15 per cent, loans to industry are growing slowly. Also, while collection of indirect taxes is very high, direct taxes were not very buoyant.
Sectorally too, while coal, steel, aluminium are not showing much growth, electricity generation and car sales are rising. Subramanian was talking to reporters after the mid-year economic analysis, authored by him, was tabled in Parliament. It also mentions that the data uncertainty is sometimes puzzling.
"A lot is going on in the economy and different things are happening in different sectors, which makes interpreting it somewhat difficult," he said, adding that overall tax revenues are buoyant, inflation is under control and external situation robust.
Subramanian said the "country can say with some amount of confidence that economy is well cushioned to absorb any volatility that might come about because of recent US Federal Reserve's action (of hiking rates) yesterday or going forward. In that sense macro economy is well cushioned".
He said challenges remain on reviving private investment going forward as the economy cannot sustain consumption and public investment for long.
"Outlook, going forward is little bit challenging... Private sector investment remains challenge because of legacy issues. Investment recovery will remain weak. Corporate sector is indebted and agriculture is not contributing as much," he said.
While making a case for setting a more realistic disinvestment target for next year, Subramanian asserted that there would not be any expenditure cuts in the fourth quarter of this fiscal. "Fiscal deficit target of 3.9 per cent this year will be steadfastly met...3.5 per cent next year looks more challenging," he said.
