India must tap foreign capital to trigger investment cycle: CEA
Chief Economic Advisor Krishnamurty Subramaniam on Tuesday said India must tap foreign investment to trigger investment cycle that will lead to higher growth of 8 per cent which is needed for becoming a $5 trillion economy by 2025.
"We also need to be tapping into foreign capital. In some sense it triggers this virtuous cycle and once this cycle is triggered, then we get investment, productivity, jobs. Today that is required. If we are to grow in that 8% (to be able to be a $5 trillion economy) then we need to tap foreign capital and this has to be encouraged," he said at a book launch.
In her Budget speech, Finance Minister Nirmala Sitharaman announced India's plans to go for first sovereign bonds in overseas markets to tap the low-cost funds to raise as much as $10 billion in a step that could ease pressure on local markets saturated with debt supply.
The CEA also said the target of $ 5 trillion is a stretched one but with behavioural change, it's achievable.
"The $ 5 trillion as a goal is of course going to be a little bit of a stretch. But then if the goal is too easy, it doesn't motivate us. If the goal is too high, you just raise your hands and say it is not achievable...15-20% stretch is optimal level of strength. That's why we need behavioural change. Whether its lower tax GDP to higher tax GDP, lower savings to higher savings , these are very important", Subramanian said.
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