“A major concern confronting the Indian economy relates to the slowdown in growth witnessed in the past 5 years” according to C Rangarajan, former Chairman, Economic Advisory Council to the Prime Minister.
It is true that even after the slowdown, India’s growth has been one of the highest in the world. Nevertheless, concern persists because the slowdown has had an even greater impact on employment, he said while delivering the Foundation Day lecture of the School of Management Studies, University of Hyderabad, on Thursday.
The former RBI Governor and present Chancellor of Hyderabad University said job creation happens only when the momentum of high growth is maintained. “We have shown that India has the potential to grow at 8-9 per cent in a sustained way.”
In his lecture titled ‘On Stepping up India’s Economic Growth’, Rangarajan spoke on the ways to get back to the high growth rate, which is based on a new approach that incorporates trends in growth, determinants of growth; increasing incremental capital-output ratio (ICOR), and declining investment rate.
Rangarajan feels the coming decade will be crucial for India in many ways. If the growth rate is at 8-9 per cent per annum, per capita GDP is estimated to increase from the current level of $1,600 to $ 8,000 by 2030. Then India will transit from being a low-income to a truly middle-income country.
“We need to overcome the low growth phase as quickly as possible, as growth is the answer to many of our socio-economic problems. In the recent period, we have launched a number of schemes aimed at broadening the base of growth. These include the employment guarantee scheme, universalisation of education, expansion of rural health and providing food security.”
However, all these programmes have made a substantial demand on public expenditure. It has been possible to fund these programmes only because of the strong growth that the country witnessed in recent years. Growth has facilitated raising more resources by the government.
Development has many dimensions — it has to be inclusive, poverty-reducing and environment-friendly. All these elements need to be incorporated in the growth process. A strong and balanced growth will enable the economy to achieve multiple goals, including reducing poverty. India has to follow a twofold path of accelerating growth and directly addressing issues of the vulnerable and the poor.
Investment, as they say, is an act of faith in the future. If there has to be an investment resurgence, it is necessary to create a climate which promotes this faith. “We have already outlined the actions that can be taken in the purely economic arena. But ‘animal spirits’ are also influenced by what happens in the polity and society. Avoidance of divisive issues is paramount in this context. Undiluted attention to development is the need of the hour,” the former RBI chief felt.
Appa Rao Podile, Vice-Chancellor, Hyderabad University, presided over the function. B Raja Shekhar, Dean, School of Management Studies, gave the welcome address and briefed the guests and audience about the activities of the school.