A US professor believes its highly unlikely that India will become a USD 5 trillion economy by 2024-25 due to the slowdown caused by the COVID-19 pandemic. University of Massachusetts, Co-Director, Asian Political Economy Program, Professor Vamsi Vakulabharanam told PTI the Indian economy will be smaller for a considerable period of next year compared to its size in 2019.
Noting that the pandemic is certainly the most important factor for economic slowdown, he pointed out that India’s decline is much steeper than what other developing countries and the global economy witnessed over the last year. “As of now, the current Indian GDP is less than USD 3 trillion. If this has to jump to USD 5 trillion in four years, the economy has to grow higher than 13% per annum, on the average,” the professor explained. “Even in the best of scenarios, this is highly unlikely.”
Vakulabharanam says that even if everything goes according to the current growth projections by the Reserve Bank of India and the International Monetary Fund, the Indian economy will be smaller for a considerable period of next year than it was in 2019. The IMF and RBI had recently revised the growth rates downward. As per the latest CSO estimate, the economy contracted by 7.3% last year, and as per the latest RBI estimate, the economy will grow by 9.5% this year. Prime Minister Narendra Modi, in 2019, had envisioned to make India a USD 5 trillion economy and global power house by 2024-25.
“In the wake of this unprecedented crisis in the Indian economy, the government should have taken up drastic measures to support the poor households on both these counts,” Vakulabharanam said. “The current higher level of inflation is not a matter of serious concern for the economy. Since much of the inflation is coming out of supply slowdowns and lower capacity utilization, boosting aggregate demand ought to be the main concern of the government.”
The professor also highlighted that it is important to protect the poor from inflation in essential commodities, so the government should undertake proactive measures to ensure that the poor are not hurt in the short-term.