Arvind Subramanian says big bang reforms not easy with multiple veto centres

India is "a very frustratingly robust democracy" where unleashing "big bang" reforms is not easy given the multiple centres of veto power, Chief Economic Adviser Arvind Subramanian said.

"India is very robust, frustratingly robust democracy which means that there are multiple centres of power, multiple centres of decision making, multiple centres of veto exercise in authorities. This is not a country where you can pull a switch and say let's do reform," he said.

At the same time, the former IMF economist termed the revised GDP growth figures as a "puzzle" and said that the numbers have been "bumped up" and it is a mystery how to interpret them.

The upward revision to GDP figures, pursuant to change in methodology, has come in for criticism from various quarters, including by RBI Governor Raghuram Rajan, IMF and most recently a Parliamentary panel.

Subramanian, who earlier also termed the the revised GDP figures as "puzzling", was delivering a lecture at Panjab University on 'Economic Survey 2014-15'.

"In robust democracy, you do not get big bang reforms. It is not easy to do this thing," he said.

He noted that the big bang reforms took place only when a country was facing a crisis.

"If you look around the world how the countries have done in last 50-60 or 100 years, you will find out that what we call big bang reforms that was the expectations, a lot of reform took place in the (union) budget.

"You will find that big bang reforms do not happen except around crisis when country is in a financial crisis then there is an opportunity for big bang reforms," he said while pointing out India's 1991 economic crisis.

Describing India as a "recovering economy", the Chief Economic Adviser said that the country was growing "well below its potential".

"We should see India as more of a recovering economy not as an economy that is surging at a rate of 8-8.5%. Even the number is 8 and 8.5% but it growing well below its potential," he said.

Subramanian said that Economic Survey 2014-15 has pegged country's economic growth at 8-8.5% for 2015-16

However, he described growth numbers are a "bit of puzzle" because of new estimates.

"New growth numbers are a bit of puzzle. Our growth rates have been bumped up after by new estimates that have come up by statisticians...It is a bit of mystery how to interpret it.

If you look at all indicators of Indian economy, like credit growth, tax collection, that do not seem to be consistent with the economy supposedly growing at 7.5% or so," he said. 

Subramanian also expressed confidence that India could achieve sustainable double-digit growth on account of favourable external factors like decreasing oil prices.

"...If you put together the fact this is a unique political opportunity for change combined with the fact that external environment was much more favourable and it is a hopeful moment because you get possibility of sustainable double digit economic growth which will catapult India into different growth trajectory," he said.

"Commodity prices like oil prices are low. It gives India a lot of room because fiscal deficit is lower, subsidies are lower, inflation is lower that gives India a lot of space to experiment with policies and new policies," said

Subramanian who had worked in the Research Department of the International Monetary Fund (1992-2013).

"In the last few months, if you look around the world, India stands out as few bright spots in the world because China economy slowing down, Europe, Japan, Brazil are in trouble, Russia is not doing well. (Therefore), India becomes a very attractive investment destination," he asserted.