India needs to grow at 8 per cent on sustained basis to create sufficient jobs to reduce poverty and inequality, India's executive director at International Monetary Fund (IMF) Krishnamurthy Venkata Subramanian said on Wednesday. India's economy grew by better-than-expected 8.4 per cent in the final three months of 2023 - the fastest pace in one-and-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 organised 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.
The growth rate in October-December was higher than the growth rate of 7.6 per cent in the previous three years, and it helped take the estimate for the current fiscal (April 2023 to March 2024) to 7.6 per cent, according to the data released by the National Statistical Office (NSO). The Reserve Bank has projected GDP growth for the next financial year at 7 per cent on the back of improved household consumption and upturn in the private capex cycle.
He said, India has copied the western model by aiming to bring down the fiscal deficit to 3 per cent and debt-to-GDP ratio below 66 per cent, which may not be relevant in the Indian context. Subramanian further noted that the size of India's platform economy is the third largest in the world, after the US and Europe.
Observing that Fiscal Responsibility and Budget Management (FRBM) framework had recommended that the government should aim to bring down debt-to-GDP ratio below 66 per cent and fiscal deficit target at 3 per cent, he enquired from where these numbers came from. These numbers, he added, came from the Maastricht Treaty (Netherlands), which was signed in December 1991, to create a political union in Europe, to synchronize fiscal policy to enable a monetary union among the 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 added that despite so much difference, India has adopted those numbers "targeting debt-to-GDP ratio to 66 per cent and fiscal deficit to 3 per cent, without accounting for the important differences."
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