Former Reserve Bank of India governor Raghuram Rajan believes that the latest GDP figures for India — 6.5 percent annual growth and 7.4 percent in the last quarter — are not accurate indicators of the country’s economic growth.
He believes that yardstick for economic growth should be inclusive and sustainable, insisting that this approach is imperative to achieve global uncertainties.
India must strive for a growth of 8 percent to 9 percent annually to achieve the objective of becoming a developed nation by 2047, he told media outlets.
“I’ve been shouting from the rooftops forever—if we want to become a Viksit Desh by 2047, we need more like 8, 8.5 to 9 percent growth, because we are still a relatively poor nation,” he was quoted as saying in an interview.
He said that unlocking investment, broadening the consumption base, and building confidence among domestic and foreign businesses to make long-term investments would be critical.
Additionally, he noted that growing global uncertainty poses a serious threat to India’s development, specifically citing the uncertain trade environment. Rajan predicted a slight slowdown in growth, pointing out that the exceptional performance at the beginning of the year would be hampered by global tariff uncertainty, which make investors hesitant about where to put their money.
On a positive note, Rajan pointed to signs of resurgence in rural demand and a favourable monsoon outlook, which he claimed would contribute to lowering inequality.
Regarding the IMF projections that India’s nominal GDP would soon surpass that of Japan to become the fourth-largest economy, Rajan welcomed the milestone but urged a measured perspective. He acknowledged that India was on track to cross Germany’s GDP within a couple of years but cautioned against equating overall GDP rankings with true economic progress.
He explained that exchange rate fluctuations, such as the strengthening of the Japanese Yen, also impact these rankings.
Furthermore, Rajan said that while this indicates India is on a good path, it should not lead to over-enthusiasm because India remains much poorer than these countries. He highlighted that the average citizen’s wealth, not aggregate GDP, is what truly matters, especially given India’s status as the most populous country in the world.
Rajan concluded that India must focus on raising incomes and creating broad-based prosperity rather than merely chasing headline economic rankings.
He reminded that the traditional manufacturing-led growth model faces challenges, and the country needs to generate jobs in services and avenues for exports.
