States to have bigger role in pushing growth over 6.5%: CEA Nageswaran

The government's top economist was speaking at a seminar organised by Centre for Social and Economic Progress.

State governments have a bigger role to play than the Centre in boosting the Indian economy in the coming years, Chief Economic Adviser V Anantha Nageswaran has said.

Speaking on March 29 at a seminar organised by New Delhi-based Centre for Social and Economic Progress, Nageswaran said the restoration of financial, credit, and investment cycles will see the economy growing by 6.5 percent on average in the coming decade. However, to exceed that rate of growth will require states to enact reforms in spheres that fall under their purview.

"...much of it has to come from state governments because issues like health, education, labour markets, land markets, et cetera are largely in the realm of state government," Nageswaran said.

"So, state reforms in these areas and in terms of service delivery and in terms of preparing the young work force to have the right kind of skillset for the next 20-30 years in terms of education reforms, those initiatives...the onus largely rests with state governments," he added.

The Indian economy is estimated to grow by 7 percent this financial year, with the 2022-23 Economic Survey pegging next year's growth at 6.5 percent - 10 basis points lower than the Reserve Bank of India's forecast of 6.4 percent.

Nageswaran said the Union government will have a role in boosting growth by being active in key areas such as securing India's energy needs in the current global move to fight climate change.

"That will be the biggest contribution that the Union government can make in the coming years because there is tremendous pressure on energy transition for justifiable reasons," the government's top economist said.

Nageswaran said the government had to get the financing of the energy transition "right", and this could not be done by ignoring growth objectives.

"…without domestic growth there is no social stability nor public acceptance of some of the behavioral changes we would like them (the public) to make to succeed in the energy transition. Look at the reaction to the pension reforms in France, for example, or for that matter, in 2019, the Yellow Vest resistance," he said.

"So we can't tell people that carbon pricing will push your energy prices higher and it will all be a matter of a year or two before economic growth is restored back to the pre-energy transition years. That's not going to happen. We have to be candid, we have to be honest, and we have to understand that there will be growth sacrifice."