Former RBI Governor Rangarajan Says $5-Trillion GDP Target Simply Out Of Question
Even at $5 trillion, India’s per capita would be in the low-to-middle income bracket, the former RBI Governor said.
Stating that the economy is in bad shape, former Reserve Bank governor C Rangarajan has said at the current growth rate, reaching the $5-trillion gross domestic product target by 2025 is “simply out of question”.
The Modi government soon after assuming office for the second term has set a target of taking the economy to $5 trillion over the next five years. But since there have been dark clouds gathering all over the economy leading many to question the maintainability of the target.
The economy has been on steady decline with growth rate slowing from 8.2 percent in the fiscal year 2016 to 6.8 percent FY19.
While the first-quarter growth slipped to a six-year low of 5 percent, the best forecast for the second quarter is 4.3 percent now. Even Reserve Bank of India has lowered its growth full-year forecast by a full 90 basis points in two months to 6.1 percent in its October policy review.
“Today our economy is about $2.7 trillion and we are talking about doubling this over the next five years at $5 trillion. The required rate of growth to achieve that level is in excess of 9 percent per annum. Reaching $5 trillion by 2025 is simply out of question,” Rangarajan said on Thursday.
“You have lost two years. This year it is going to be under-6 percent growth and next year it may be about 7 percent. Thereafter the economy may pick up,” he said while addressing a function organised by IBS-ICFAI Business School.
He also said if at all the GDP becomes a $5-trillion gorilla, our per capita income will go up to $3,600 from the present $1,800, leaving us still in the low-middle income country bracket.
“The definition of a developed country is the one whose per capita income is $12,000. It will take 22 years for us to reach that level provided we grow at 9 percent per annum,” the former central banker said.