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$5Trillion GDP target is ‘simply out of question’: Former RBI Governor C. Rangarajan

C. Rangarajan former governor of Reserve Bank of India(RBI) on Thursday said, at the current growth rate, reaching the USD $5Trillion GDP target by 2025 is ‘simply out of question’. He said it will take 22 years for us to reach that level provided we grow at 9 percent per annum.

C Rangarajan on Thursday during a function organized by IBS-ICFAI Business School said, “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 percent per annum. Reaching USD $5 trillion by 2025 is simply out of question.”

He further said, “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 also added, 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 percent per annum,”  said concluding his statement.

The Modi government soon after resuming the office for the second term has set a target of taking the economy to USD $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 a steady decline with the growth rate slowing from 8.2 percent in FY16 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 RBI has lowered its growth full-year forecast by a full 9o bps in two months to 6.1 percent in its October policy review.

Finance Minister Nirmala Sitharaman has been very optimistic about Modi’s vision of making India a powerful country. She says it is ‘Challenging’ but ‘realistic’.

During a lecture, Finance Minister Nirmala Sitharaman on Tuesday at Columbus University’s School of International and Public Affairs said, “In 2014, when the National Democratic Alliance (NDA) was voted to power by the world’s largest democracy, India was a $1.7 trillion economy. In 2019, India has become a $2.7 trillion economy, having added one trillion US dollars in the last five years. Our vision to become a 5 trillion economy by 2024-25 is challenging, but it is realizable.”

She further said, “To become a $5 trillion economy, India’s GDP needs to go faster than what we grew at an average of 7.5 percent in the last five years. That’s a matter of fact statement. Inflation needs to be at 4 percent to ensure a commensurate increase in purchasing power,” adding that inflation in the last five years was 4.5 percent and has been on a declining path to reach 3.4 percent in 2018-19.

“We continue to remain one of the fastest-growing economies in the world.” She stressed that in an emerging economy, poised for higher growth, “some increase in income inequality is inevitable. India is no exception to this trend.”

She also emphasized that a $5 trillion economy will make India a global economic powerhouse moving it from the 7th to 3rd position in terms of the current dollar exchange rate.

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