“Fundamentals of the economy are very very strong… fundamentals of the economy have not changed and it would be back on the 7-8% growth path,” Subramanian said at a conference organised by the Federation of Indian Chambers of Commerce and Industry on Wednesday. “The economy typically goes through a virtuous cycle. The key driver of this cycle is investment. It’s investment that enhances productivity, and productivity enhances wages and creates jobs in the economy,” said Subramanian, who took charge as chief economic advisor in December last year. “Productivity increases purchasing power and anticipating that purchasing power, corporates invest more.”
He said that in 2008-09, the investment rate in the country was around 40% of the GDP which eventually came down due to various reasons, including high non-performing assets and “excessive capacity creation at corporate level”.