Krishnamurthy Venkata Subramanian, India's executive director at the International Monetary Fund (IMF), said on Wednesday that India must expand at 8% on a sustained basis in order to create enough jobs to eradicate poverty and inequality.
In the final three months of 2023, India's GDP expanded at a faster-than-expected rate of 8.4 percent, the fastest pace in one and a half years.
"We should be impatient even if we grow at 7 per cent. We should be looking to grow at 8 per cent and above, as the country needs to create a lot of infrastructure," Subramanian said, addressing an event organized by OMI Foundation.
"By growing at 8 per cent, we have the potential to create a lot of jobs, thereby reducing poverty and inequality," the former CEA said.
According to data issued by the National Statistical Office (NSO), the growth rate in October-December was greater than the 7.6 percent growth rate in the preceding three years, helping to raise the estimate for the current fiscal year (April 2023 to March 2024) to 7.6 percent.
The Reserve Bank forecasts 7% GDP growth for the coming fiscal year, citing higher household consumption and an upturn in the private investment cycle.
He stated that India has followed the Western model by attempting to reduce the fiscal deficit to 3% and the debt-to-GDP ratio to below 66%, which may not be appropriate in the Indian situation. Subramanian went on to say that India's platform economy is the world's third largest, trailing only the United States and Europe.
Observing that the Fiscal Responsibility and Budget Management (FRBM) framework advised that the government try to reduce the debt-to-GDP ratio to less than 66% and set a fiscal deficit objective of 3%, he inquired as to where these figures came from.
These figures, he explained, originated from the Maastricht Treaty (Netherlands), which was signed in December 1991 to establish a political union in Europe, as well as to synchronize fiscal policies in order to permit a monetary union among European nations.
"I am sure all of us recognise that the state at which the Indian economy is, very very different from the US or the European economy. They have created almost all infrastructure (and) they almost don't have absolute poverty," he said.
He said that, despite the significant discrepancies, India has taken those numbers, "targeting the debt-to-GDP ratio to 66% and the fiscal deficit to 3%, without accounting for the important differences."
