Becoming $5-trillion economy by 2025 is ‘simply out of question’, says ex-RBI governor C Rangarajan
Rangarajan said India will need another 22 years of sustained growth to become a ‘developed country’.
Former Reserve Bank of India Governor C Rangarajan on Thursday said it was “simply out of question” for India to become a $5-trillion economy by 2025. He said India will need another 22 years of sustained growth to become a “developed country”.
The Narendra Modi-led government aims to make India a $5-trillion economy in the next five years. However, the economy has been going through a slowdown, growing just 5% in the April-June quarter, the slowest in six years. Industrial output in September contracted 4.3% when compared to same month last year. In May, the government had released a report by the National Sample Survey Organisation that showed that India’s unemployment rate rose to a 45-year high of 6.1% in 2017-’18. Another survey showed that the monthly per capita consumption expenditure has declined for the first time in 2017-’18 since the 1970s.
“Today our economy is about $2.7 trillion and we are talking about doubling this over the next five years at $5 trillion,” Rangarajan said while addressing a function organised by IBS-ICFAI Business School in Ahmedabad. “The required rate of growth to achieve that level is in excess of 9% per annum. Reaching $5 trillion by 2025 is simply out of question.”
Rangarajan predicted that the overall GDP growth this year would be under 6%. “You have lost two years,” he said, according to The Indian Express. “The task before us is highly daunting. We need to get out of the current slowdown as quickly as possible.”
The economist, who was awarded the Padma Vibhushan in 2002, pointed out that even if the GDP target was achieved, India would still remain in the low-middle income bracket. “The definition of a developed country is the one whose per capita income is $12,000,” he said. “It will take 22 years for us to reach that level provided we grow at 9% per annum.”
Rangarajan said both long-and-short term measures were needed to boost the economy. “Increasing FDI and exports can help to tide over the crisis,” he said, adding that disinvestment could also help in providing funds to the government to a certain extent. On Wednesday, the Centre announced its decision to sell stakes in five state-run companies, including oil refiner Bharat Petroleum Corporation Limited.