Vibrant Gujarat Summit: 'Economy Needs $800 Billion Annually For 7% growth'

Gandhinagar: India needs $ 800 billion (Rs 50 lakh crore) annually if the economy is to grow at 7 per cent, Financial Services Secretary Hasmukh Adia said on Monday.

Noting that last year fund inflows from all traditional channels of FDIs, ECBs, FIIs and domestic capital was way below $ 200 billion, he said that government, planners and the industry would have to find alternate sources for this huge amount to finance growth.

"If the economy is to grow at 7 per cent, given a nominal inflation of 5-7 per cent, and a credit-to-GDP multiple of 1.3 per cent, the average growth rate in financing will have to be 18 per cent. In terms of numbers it comes to $ 800 billion per year," he said at the Vibrant Gujarat Summit.

While $ 130 billion came from domestic financial institutions and banks, USD 13.4 billion came from foreign institutional investors, FDI was worth USD 21.6 billion and $ 32 billion came through the ECB route, he said.

He said debt inflows through FPIs is in the range of minus $ 4.6 billion last year and the highest was USD 9 billion in FY 2012. "So, that is something that we cannot depend on," he said.

He also said that against an annual requirement of $ 800 billion net foreign institutional investments and net FDI investments were only about $ 35 billion last year. The ECB component was USD 32 billion.

"Put together, we had about $ 70 billion dollar coming into the country. There is a huge gap in financing and going by this figure, I would think we cannot solely depend on FDI and FPIs for funds but we will have to develop internal sources of funding) and that's where the challenge is," he said.