New Delhi - India can move to higher rates of economic growth if it can resolve its "twin balance sheet" problem of high corporate debt and non-performing assets (NPAs), or bad loans, accumulated in the banking system, Chief Economic Adviser (CEA) Arvind Subramanian said on Thursday.
In his address at the India Economic Conclave here organised by Times Network, Subramanian said that having overcome the short-term consequences of demonetisation and of implementing the Goods and Services tax (GST) last year, India can now propel itself onto a higher growth trajectory.
"If we can solve this twin balance sheet challenge given the new developments, and if we put the short term consequences of GST and demonetisation behind us, I think that could itself propel us to higher rates of growth than we have seen recently," the CEA said.
"After we put behind some of the major structural reform, growth has started to revive. In some ways there are two or three big reform actions that don't necessarily involve new stuff that we have to do," he added.
Subramanian also said policymakers need to re-evaluate whether more has to be done to deal with the NPAs of public sector banks, which have crossed the staggering level of Rs 8.5 lakh crore.
The government has embarked on a two-pronged strategy on bad loans.
On the one hand, it has brought in the Insolvency and Bankruptcy Code (IBC) which provides for a six-month time-bound insolvency resolution process. On the other hand, it has approved a Rs 2.11 lakh crore recapitalisation plan for state-run banks.
In June last year, the Reserve Bank of India referred 12 accounts, totalling about 25 per cent of the gross NPAs, for resolution under the IBC.