Stating that the economy is in bad shape, former Reserve Bank governor C. Rangarajan has said at the current growth rate, reaching the $5-trillion GDP target by 2025 is "simply out of question".
The Modi government soon after assuming office for the second term has set a target of taking the economy to $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.
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The economy has been on steady decline with growth rate slowing from 8.2 per cent in FY16 to 6.8 per cent FY19.
While the first quarter growth slipped to a six-year low of 5 per cent, the best forecast for the second quarter is 4.3 per cent now. Even RBI has lowered its growth full year forecast by a full 90 bps in two months to 6.1 per cent in its October policy review.
"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 cent per annum. Reaching $5 trillion by 2025 is simply out of question," Rangarajan said here on Thursday.
"You have lost two years. This year it is going to be under-6 per cent growth and next year it may be about 7 per cent. Thereafter, the economy may pick up," he said while addressing a function organised by IBS-ICFAI Business School.
He also if at all the GDP becomes a $5-trillion gorilla, our per capita income will grow still $3,600 up from the present $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 $12,000. It will take 22 years for us to reach that level provided we grow at 9 per cent per annum," the former central banker said.
