In order to achieve the USD 5 trillion economy, growth, which is the answer to many socioeconomic problems, should therefore become the undivided concern of the government and equity which is equally important will be a distant dream unless it is supported by high growth spurred by reforms.
India becoming a USD 5 trillion economy by 2025 is impossible under the current circumstance and the country needs to grow at 9 percent per annum for the next 5 years in order to achieve that, former Reserve Bank Governor C Rangarajan said on Friday. Delivering his address at 11th Convocation of ICFAI Foundation for Higher Education, Rangarajan said attempts should be made to curb the adverse impact of the third wave of COVID-19 if it happens and both the coverage of vaccination and the pace of investment in health infrastructure should be accelerated within the strategy of expanding the overall infrastructure investment.
"A few years ago, there was the hope that India would become a USD 5 trillion strong economy by 2025. That has become impossible. India's economy was USD 2.7 trillion strong in 2019. At the end of March 22, we will still be at the same level. To go from USD 2.7 trillion to USD 5 trillion, the economy has to grow at 9 percent for 5 consecutive years," Rangarajan said.
In order to achieve the USD 5 trillion economy, growth, which is the answer to many socioeconomic problems, should therefore become the undivided concern of the government and equity which is equally important will be a distant dream unless it is supported by high growth spurred by reforms. As revenues improve, expenditures can be increased even as there is no need to reduce the fiscal deficit below the budgeted level of 6.8 percent of GDP and fiscal consolidation may start from the next financial year, he opined.
India indeed needs a faster rate of growth to make up for the loss of output in the previous two years from the trend rate and must lay the foundation for faster growth in this year itself, the economist said. Stating that the economic activity had come to a grinding halt due to the lockdown imposed to prevent the spread of COVID-19, he said in 2021, India's GDP fell by 7.3 percent, USA by 3.5 percent, France by 8.1 percent and the UK by 9.8 percent.
It is only with the relaxation of lockdown restrictions, the economy has started looking up, the former Chairman of Economic Advisory Council to the Prime Minister said. "While the economic impact of the first wave was severe, the health impact of the second wave was serious. The contraction of the economy has hit hard the daily wage earners and migrant labour. Life Versus Livelihood has emerged as a serious issue," he said.