Ahmedabad: 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.
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.
"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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