Panagaria added that India “certainly remains” the fastest-growing major economy in the coming years.

Renowned economist Arvind Panagaria says India is on the verge of returning to a high-growth trajectory. He was confident that by 2027-2028, India would become the third-largest economy in the world.

Former NITI President Aayog said “India is now the fifth-largest economy. We are already in 2023. So, by 2027-28, India should become the third largest economy.” According to The Economist in Economic Review, “near stories talk of a much stronger economy than growing at 6.5%.”

I sense that given where India stands currently, it should get back to 7% plus kind of growth rate,” he said.

Panagaria added that India’s current growth rate is at the same level as in 2003, near 8%, and has held that pace for several years.

Economists said several reforms were implemented during the Covid-19 pandemic and weaknesses in the economy such as bank NPAs and weak corporate balance sheets were addressed.

We’re seeing this surge in both public and private investments, the fact that policy reforms have happened, lots of infrastructure has been built up. And the fact that there is an effective government in place, very credible (government),” Arvind Panagariya said.

On Union Budget 2023, the eminent economist said, “A government which realizes its strengths and which is I think the reason you don’t see a whole lot of populism in the budget, even though this is the last full budget before parliamentary elections, tells you and makes me feel that India is on the cusp of returning to a high growth trajectory“.

Panagaria added that India “will certainly remain” the fastest-growing major economy for several years. He predicted that India’s economic growth rate would remain around 7% this year. Liberalization and trade fronts that call for “significant reductions in tariffs”, then “we can easily get to 8%”.

He said the “rest of the strengths” for achieving this growth are present in the system. Some of the reforms that are the ongoing need to be implemented, for instance, the labor law reform.

“If we can do that, I do not doubt that we would sustain 7% and could in principle, I think, touch 8 percent.”

Referring to the announcements in the budget, he said his expectations were “fully met”.

Due to fiscal consolidation, the debt-to-GDP ratio has risen to about 84%, and the current post-COVID-19 situation had to increase spending at the time, and tax revenue was hit, resulting in a huge budget deficit and accumulation of debt. He said. “So we needed to get back to consolidation and the Finance Minister has made a good effort in that direction.”

The revised budget deficit estimate for 2022-2023 is 6.4% and the 2023-24 estimate is currently 5.9%.

It’s a modest reduction in the fiscal deficit. But given the other features of the budget, I think that even that modest reduction in the deficit carries a good signal,” Panagariya said. 

He added that the Modi government has been very successful in implementing large-scale and rapid infrastructure projects.

So this (personal income tax) was a long-awaited reform and a big one so I am very pleased with that,” he said.