Virendra Pandit
New Delhi: Now that the Covid-19 pandemic has made it impossible to achieve India’s hope of becoming a USD 5 trillion economy by 2025, what the country can do now is to grow at a rate of nine percent for the next five consecutive years to realize this aim, former Reserve Bank of Indian (RBI) Governor C. Rangarajan said on Friday.
“While the economic impact of the first Covid-19 wave was severe, the health impact of the second was serious. The contraction of the economy has hit hard the daily wage earners and migrant labor. Life versus livelihood has emerged as a serious issue,” the noted economist and professor, who was decorated with India’s second-highest civilian award, the Padma Vibhushan in 2002, observed.
Addressing the 11th Convocation of ICFAI Foundation for Higher Education in Hyderabad, he said attempts should be made to curb the adverse impact of a possible third wave of the pandemic and both the coverage of vaccination and the pace of investment in health infrastructure should be accelerated within the strategy of expanding the overall infrastructure investment.
“A few years ago, there was the hope that India would become a USD five trillion strong economy by 2025. That has become impossible. India’s economy was USD 2.7 trillion strong in 2019. At the end of March 2022, we will still be at the same level. To go from USD 2.7 trillion to USD 5 trillion, the economy has to grow at a 9 percent rate for five consecutive years,” Dr. Rangarajan, a former Chairman of the Prime Minister’s Economic Advisory Council, said.
In order to achieve this growth, which is the answer to many socioeconomic problems, should therefore become the undivided concern of the government, and equity, which is equally important, will be a distant dream unless high growth spurred by reforms supports it.
He said as revenues improve, we can increase expenditures even as there is no need to reduce the fiscal deficit below the budgeted level of 6.8 percent of GDP and fiscal consolidation may start from the next financial year.
Indeed, India needs a faster rate of growth to make up for losing output in the previous two pandemic financial year years from the trend rate and must lay the foundation for faster growth in this fiscal year itself, he asserted, according to media reports.
Observing that the nation’s economic activity had come to a grinding halt because of the lockdown the government imposed to prevent the spread of Covid-19, Rangarajan said, in 2021, India’s GDP fell by 7.3 per cent, USA’s by 3.5 per cent, France’s by 8.1 per cent and the UK’s by 9.8 percent.
It is only with the relaxation of lockdown restrictions that the economy has started looking up.