Krishnamurthy Venkata Subramanian, India’s executive director at the International Monetary Fund (IMF), underscored the imperative of sustained 8% growth to effectively address poverty and inequality by generating sufficient employment opportunities. Subramanian’s remarks emphasize the critical link between economic growth and social development.
India’s economy exhibited robust performance in the final quarter of 2023, surpassing expectations with a growth rate of 8.4%, marking the fastest expansion in eighteen months. This encouraging growth trajectory highlights the nation’s potential for continued economic advancement and underscores the importance of fostering sustained growth to address pressing socio-economic challenges.
Subramanian, speaking at an event organized by the OMI Foundation, stressed the importance of maintaining ambition even amidst a 7% growth rate, advocating for a target of 8% and beyond to facilitate extensive infrastructure development.
Echoing this sentiment, the former Chief Economic Advisor emphasized the potential of an 8% growth rate to catalyze job creation, thus playing a pivotal role in mitigating poverty and reducing inequality.
Data released by the National Statistical Office (NSO) revealed that the growth rate during the October-December period outpaced the 7.6% average observed over the previous three years, contributing to an estimated 7.6% growth rate for the current fiscal year (April 2023 to March 2024).
In contrast, the Reserve Bank of India (RBI) has projected a GDP growth rate of 7% for the upcoming financial year, citing improved household consumption and a resurgence in private capital expenditure as contributing factors.
Subramanian criticized India’s emulation of the western model by targeting a fiscal deficit of 3% and a debt-to-GDP ratio below 66%, arguing that these benchmarks may not be applicable in the Indian context.
He highlighted India’s substantial platform economy, ranking third globally after the US and Europe, underscoring the nation’s significant economic potential.
Questioning the origins of the Fiscal Responsibility and Budget Management (FRBM) framework’s recommendations, Subramanian queried the rationale behind setting targets for a debt-to-GDP ratio below 66% and a fiscal deficit of 3%.
Subramanian clarified that these benchmarks originated from the Maastricht Treaty (Netherlands), signed in December 1991, which aimed to foster a political union in Europe and synchronize fiscal policies to facilitate a monetary union among European nations.
Highlighting the vast disparities between the Indian economy and those of the US and Europe, Subramanian underscored the substantial infrastructure development and minimal absolute poverty prevalent in these regions.
Expressing concern over India’s adoption of these metrics without considering the significant differences in economic conditions, Subramanian emphasized the need for a tailored approach that accounts for India’s unique socio-economic landscape.