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Reaching $5 trillion target at current rate 'simply out of question': C Rangarajan

By PTI
|

New Delhi, Nov 22: Stating that the economy is in a bad shape, former Reserve Bank of India (RBI) governor C Rangarajan on Thursday said reaching the $5-trillion Gross Domestic Product (GDP) target by 2025 is "simply out of question" at the current growth rate.

Former Reserve Bank of India (RBI) governor C Rangarajan

Soon after assuming office for the second term in May, the Narendra Modi-led government set a target of taking the economy to $5 trillion over the next five years. But there have been several clouds over the economy since, leading many to question the maintainability of the target.

"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% per annum. Reaching $5 trillion by 2025 is simply out of question," Rangarajan said.

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"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, addressing a function organised by IBS-ICFAI Business School.

Rangarajan added if at all the GDP becomes a $5-trillion gorilla, India's per capita income will grow $3,600 (around Rs 2.58 lakh) up from the present $1,800 (around Rs 1.29 lakh), leaving us still in the low-middle income country bracket.

"The definition of a developed country is one whose per capita income is $12,000 (around Rs 8.6 lakh). It will take 22 years for us to reach that level provided we grow at 9% per annum," the former central banker said.

The economy has been on a steady decline, with growth rate slowing from 8.2% in FY16 to 6.8% in FY19. While the first quarter growth slipped to a six-year low of 5%, the best forecast for the second quarter is 4.3%.

Even the RBI has lowered its growth full year forecast by a full 9o bps in two months to 6.1% in its October policy review.

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