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Former Reserve Bank of India (RBI) Governor D Subbarao today said India must grow in double digits in order to reduce poverty in the country.
“We have more number of poor people than the entire continent of Africa. Therefore, we need to grow at 10 or 10-plus percent,” he said while underlining the need for more action on the government side to achieve higher growth rate going forward.
According to Subbarao, there have been some positive steps but to achieve a structural shift towards a high growth trajectory deeper reforms are required.
“So far, they have the advantage of positive investor sentiment and they have implemented some low hanging fruit type of reforms. They have been lucky in terms of fall in global oil prices and in terms of the outcome of monsoon last year. Going forward, a cyclical upturn in growth is possible but to aim at a structural shift in growth to 8-9-10 per cent you need to improve productivity in the economy. You need to increase the investments to improve the productivity and also improve the governance,” Subbarao said.
Delivering the foundation day lecture at ICFAI University on ‘RBI Making a Difference to Everyday Lives’ the former RBI Governor, who often came under criticism for holding interest rates high at the cost of economic growth during his tenure, said calibrating the monetary policy to achieve low and stable inflationary conditions in the country was in the interests of both consumers and investors.
“When the inflation is high, consumers and the investors cannot make informed decisions. And high inflation affects poor people more, whose voices have to be heard by the RBI,” he said in response to the criticism he faced for keeping the policy rates high in a bid to taper inflationary pressures.
He said 4-5 per cent inflation was good for the Indian conditions, and added the US Federal Reserve had raised interest rates to prevent future inflation and financial instability. He said the impact of the US Federal Reserve’s action on India would be short-term. “In the longer term, the investors would discriminate between the promising emerging economies and not-so-promising emerging economies. I think India would be a promising emerging economy,” Subbarao said.
On the upward revision of GDP growth estimates for 2012-13, he said every country was trying to align its GDP computation with global standards and it needs to be known if the steep rise in the estimates was a result of structural factors or purely statistical. “It doesn't help me anymore to say that in 2012-13, I had actually grown at 6.7 per cent and not at 4.7 per cent because it was something that happened in the past,” he said on a lighter note.
On the growth front, he said the states must take lead on the investment front as much would happen only if the states take the initiative as was done by some states, including Andhra Pradesh, after the economic reforms were initiated in the early 90s.
