Stating that the economy is in bad shape, former Reserve Bank governor C Rangarajan has said at the current growth rate, reaching the USD 5-trillion GDP target by 2025 is “simply out of question”.
The Modi government set a target of taking the economy to USD 5 trillion over the next five years. But due to recent developments in the economy, there is uncertainty over the maintainability of the target.
The economy has been on a steady decline with the growth rate slowing from 8.2% in FY16 to 6.8% FY19.
While the first-quarter growth slipped to a six-year low of 5%, the best forecast for the second quarter is 4.3% now. Even RBI has lowered its growth full-year forecast by a full 9o bps in two months to 6.1 in its October policy review.
“Today our economy is about USD 2.7 trillion and we are talking about doubling this over the next five years at USD 5 trillion. The required rate of growth to achieve that level is in excess of 9% per annum. Reaching USD 5 trillion by 2025 is simply out of question,” Rangarajan said.
“You have lost two years. This year it is going to be under-6% growth and next year it may be about 7%. Thereafter the economy may pick up,” he said while addressing a function organised by IBS-ICFAI Business School.
He also said that if at all the GDP becomes a USD 5-trillion gorilla, our per capita income will grow still USD 3,600 up from the present USD 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 USD 12,000. It will take 22 years for us to reach that level provided we grow at 9% per annum,” the former RBI governor said.