NITI's growth rate target realistic, not wishful thinking: VC Rajiv Kumar

States are best placed to assess where the distress is and what palliatives are given, says Niti Aayog's V-C Rajiv Kumar

Niti Aayog's 'Strategy for New India @75' document aims to accelerate India's economic growth to 8-9 per cent and make the country a $5-trillion economy by 2030. Aayog vice-chairman Rajiv Kumar told Indivjal Dhasmana that the targets are realistic and achievable. Edited excerpts from the interview:

Are targets set in the strategic paper not sort of wishful thinking than achievable goals, say for example annual average economic growth rate of 8 per cent for the next five years, when the government is projecting 7.5 per cent for the current financial year?

Wishful thinking? Everyone is saying it is a conservative target. It is very realistic. Currently, the growth rate is 7.5 per cent. Next year, it will be eight per cent and then 8.5 per cent. So, the average will be eight per cent. That will lay the foundation for reaching the double-digit growth afterward.

The paper also says that eight per cent growth rate is not enough and 9-10 per cent growth rate is needed to generate employment. Why is it so?

Employment elasticity is around 0.3 on an average, varying across sectors though. So you need 9-10 per cent economic growth rate to absorb all the labour, besides the backlog.

How long 9-10 per cent growth rate be sustained?

My view is that you have to emulate China on this front. It registered nine per cent annual growth rate for 30 years. We have to do it to break the middle-income trap. To move from $2000 per capita to $6000-7000 per capita is a huge task. You can’t achieve it unless you have that sort of growth.

The paper also talks of codifying all labour laws into one? The government has been trying for the last four years, but without success. Is it achievable?

It has the consent of the labour ministry. They are trying it and I think they will achieve it. It is work in advance progress.

The strategy also talks about increasing investment rate to 36 per cent. Isn’t it an ambitious target, given that it was 30.6 per cent in 2016-17 and the gross fixed capital formation rate was 29.2 per cent in the second quarter of the current financial year?

It is a rate which has been witnessed in a couple of years earlier. It will require incremental six percentage of GDP. If you get the corporate profitability by helping them lower costs on the one hand, and also get households on the other, it is achievable. Major decline has come in the households sector. Households sector can be ramped up by raising income and by making real estate sector more attractive.

The strategy also talks about bringing oil, natural gas, electricity and coal under the goods and services tax (GST) system. Will states agree to this proposal?

We have sent draft of the paper to all the states. I have not heard any loud opposition to the proposal from them.  As many as 24-26 states replied.

Outside the document, you also said that GST rate will ultimately converge to 15 per cent. Why do you think so?

I am not suggesting a new rate for the moment. As many as 97 per cent of the items attract 18 per cent or less rates. Prime minister Narendra Modi said 99 per cent will be brought in this category. As our tax base increases and average GST buoyancy improves, average GST rate will be probably lower than 18 per cent.

Why did you oppose farm loan waiver when political parties are vying to give it?

Because it is not a solution. It is like taking Crocin when you have high temperature. Not every patient has high temperature. States are best placed to assess where the distress is and what palliatives are given.  But, the solution is in modernization of agriculture. There are three chapters devoted to this in the strategy paper.

Niti Aayog’s strategy for New India @75 in 2022

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