Growth on track; mind public debt: World Bank chief economist Indermit Gill

New Delhi: India’s budget will help keep its growth outlook healthy, said World Bank chief economist Indermit Gill, flagging the reduction in public debt as a key focus area for the government, along with putting education in mission mode. He noted that India has done a good job of making sure the fiscal deficit is reduced from last year.“The budget will help keep the growth outlook healthy,” Singh told ET, when asked if the first full budget of the new government had done enough to boost growth, and if the bank would revise its FY25 projection. A month ago, the World Bank pushed up India’s growth forecast for the current financial year to 6.6%, from 6.4% estimated in January.

“I think it (fiscal deficit) should be brought down even more next year,” Gill said. “The government now needs to keep an eye on public debt. That comes from previous accumulated fiscal deficits and higher cost of financing debt.”

The July 23 budget pegged the fiscal deficit at 4.9% of GDP, on course to the targeted 4.5% by FY26.

Gill pointed out that India’s gross financing needs for 2024 are nearly the same as those of South Africa and Brazil, in terms of share of GDP. This wasn’t a good thing, he said, adding, “A higher cost of financing that public debt means that much less financing for the private sector.”

Indeed, finance minister Nirmala Sitharaman has said debt will be the key gauge, going ahead. “From 2026-27 onwards, our endeavour will be to keep the fiscal deficit each year such that the central government debt will be on a declining path as percentage of GDP,” she had said.CORE & EDUCATION
Gill said the country now needs to bolster private investment in the infrastructure sector. The budget has set aside Rs 11.1 lakh crore for capital expenditure.“It is not public investment in infrastructure that I am worried about, it is overall private investment that appears to be weaker than what India needs, to keep growth rates high and create jobs,” he said.

And while the continued emphasis on infrastructure is encouraging, the chief economist said India needs to focus on education as well.

“Education is now perhaps India’s weakest structural feature, and I would have really liked to see the government signal that it recognises the importance of secondary and higher education quality,” he said. “It would be great to see a mission on education. It will take time to yield results, but that only means it has to be done now, not later.”

This government, in particular, has the ability to really go after a problem, Gill said, lauding several focus areas — from the rapid digitalisation of the economy and big push on infrastructure to reduction of open defecation.

He also said conditions for working women can be made better quickly and will bring immediate gains, citing how Saudi Arabia had doubled its female labour force participation rate since 2017 from 17 to 35%.

“The enormous economic potential of Indian women needs to be realised,” he said. “Women don’t have to work outside the home if they don’t want to, but the numbers that I have seen indicate female labour force participation is abnormally low, and female unemployment rate is higher than that for men.”