Economy: India must grow at 8% to create sufficient jobs, says IMF’s India ED
Virendra Pandit
New Delhi: A senior IMF official said on Wednesday that India’s GDP needs to grow at 8 percent on a sustained basis to create sufficient jobs to reduce poverty and inequality.
India’s Executive Director at International Monetary Fund (IMF) Krishnamurthy Venkata Subramanian said the country’s economy grew by better-than-expected 8.4 percent in the final three months of 2023, which was the fastest pace in one-and-half years.
“We should be impatient even if we grow at 7 percent. We should be looking to grow at 8 percent and above, as India needs to create a lot of infrastructure,” he said at an event organized by OMI Foundation.
“By growing at 8 percent, we have the potential to create a lot of jobs, thereby reducing poverty and inequality,” the former Chief Economic Advisor (CEA) to the government said.
The growth rate in the October-December quarter of FY24 was higher than the growth rate of 7.6 percent in the previous three years, which helped take the estimate for the current fiscal (April 2023 to March 2024) to 7.6 percent, according to the data released by the National Statistical Office (NSO) recently.
The Reserve Bank of India (RBI) has projected GDP growth for the next financial year at 7 percent on the back of improved household consumption and an upturn in the private capex cycle.
Subramanian said that India has copied the Western model by aiming to bring down the fiscal deficit to 3 percent and debt-to-GDP ratio below 66 percent, which may not be relevant in the Indian context.
The size of India’s platform economy is the third-largest in the world, after the US and Europe.
Observing that the Fiscal Responsibility and Budget Management (FRBM) framework had recommended that the government should aim to bring down the debt-to-GDP ratio below 66 percent and the fiscal deficit target at 3 percent, he wondered where these numbers came from.
These numbers, he added, came from the Maastricht Treaty (Netherlands), which was signed in December 1991, to create a political union in Europe, to synchronize fiscal policy to enable a monetary union among the European nations.
“I am sure all of us recognize that the Indian economy is very different from the US or the European economy. They have created almost all infrastructure (and) they almost don’t have absolute poverty,” he said.
Despite so much difference, India has adopted those numbers “targeting debt-to-GDP ratio to 66 percent and fiscal deficit to 3 percent, without accounting for the important differences.
