Why India's Target of $5 Trillion Economy Is an Unrealistic Goal

Published December 25th, 2019 - 10:56 GMT
Why India's Target of $5 Trillion Economy Is an Unrealistic Goal
The IMF in its October forecast had projected 6.1 per cent growth for India in 2019 and the same to go up to 7 per cent in 2020. (Shutterstock)
Highlights
India aims to achieve the target by 2025.

India's much vaunted goal of becoming a $5 trillion economy by 2025 is likely to remain an unrealistic target given the dismal economic data of the past few quarters and the doubts and concerns voiced by ratings agencies and economists on the medium-term outlook.

International Monetary Fund's chief economist Gita Gopinath is among the most prominent economists to sound the alarm, arguing that Asia's third largest economy would have to grow at 10.5 per cent in nominal terms as against six per cent in the last six years, and 8-9 per cent in real terms in order to achieve the target.

The IMF in its October forecast had projected 6.1 per cent growth for India in 2019 and the same to go up to 7 per cent in 2020.

Gopinath warned that the fiscal situation in India is "challenging" and the country will certainly breach the 3.4 per cent deficit target.

Former RBI governor Raghuram Rajan, who is a Professor of Finance at the University of Chicago Booth School of Business, said repeated government "allusions to a $5 trillion economy by 2024, which would necessitate steady real growth of at least 8-9 per cent per year starting now, seem increasingly unrealistic."

By Issac John

The views/opinions expressed in this article are those of the author and do not necessarily reflect the views and opinions of Al Bawaba Business or its affiliates.


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