Ex-RBI Guv says reaching USD 5 trillion target at current rate 'simply out of question'

Ahmedabad: Stating that the economy is in a bad shape, former Reserve Bank of India (RBI) governor C Rangarajan on Thursday said reaching the USD 5-trillion Gross Domestic Product (GDP) target by 2025 is "simply out of question" at the current growth rate.

Soon after assuming office for the second term in May, the Narendra Modi-led government set a target of taking the economy to USD 5 trillion over the next five years. But there have been several clouds over the economy since, leading many to question the maintainability of the target.

"Today our economy is about USD 2.7 trillion and we are talking about doubling this over the next five years at USD 5 trillion. The required rate of growth to achieve that level is in excess of 9 per cent per annum. Reaching USD 5 trillion by 2025 is simply out of question," Rangarajan said.

"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, addressing a function organised by IBS-ICFAI Business School.

Rangarajan added if at all the GDP becomes a USD 5-trillion gorilla, India's per capita income will grow USD 3,600 (around Rs 2.58 lakh) up from the present USD 1,800 (around Rs 1.29 lakh), leaving us still in the low-middle income country bracket.

"The definition of a developed country is one whose per capita income is USD 12,000 (around Rs 8.6 lakh). 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.

The economy has been on a steady decline, with growth rate slowing from 8.2 per cent in FY16 to 6.8 per cent in 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. Even the RBI has lowered its growth full year forecast by a full 9o bps in two months to 6.1 per cent in its October policy review.