It is 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 professor Vamsi Vakulabharanam has said.
Moreover, Indian economy will be smaller for a considerable period of next year compared to its size in 2019, Vakulabharanam told PTI in an interview.
Vakulabharanam said while Covid-19 is certainly the most important factor for economic slowdown, what is notable is 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 cent per annum, on the average,” he said.
In 2019, Prime Minister Narendra Modi envisioned to make India a USD 5 trillion economy and global power house by 2024-25.
“Even in the best of scenarios, this is highly unlikely,” Vakulabharanam, co-director, Asian Political Economy Program at University of Massachusetts Amherst(USA) said.
According to him, even if everything goes according to current growth projections by the RBI and IMF, Indian economy will be smaller for a considerable period of next year than it was in 2019.
The IMF and the RBI have very recently revised the growth rates downward. As per the latest CSO estimate, the economy contracted by 7.3 per cent last year, and as per the latest RBI estimate, the economy will grow by 9.5 per cent this year.
Asked what fiscal measures are necessary to support households in distress, he said that they have two basic needs: minimum subsistence and accessible health care.
“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.
On high inflation, he 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,” he said, adding that if this leads to a rise in inflation in the short-run, that should not worry the government.
Vakulabharanam, however, noted 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.