The country needs to accelerate economic growth to above eight per cent to achieve its target of becoming a USD 5-trillion economy by 2025, State Bank of India former chairman Rajnish Kumar said.
“If India wants to become a USD 5-trillion economy then obviously we can’t be happy with a 5-6 per cent economic growth. We need to grow above eight per cent,” Kumar said at a virtual event organised by the IMC Chamber of Commerce and Industry.
For a growth of eight per cent and above, he said, the country needs a huge investment in the economy, lower tax rates that can ensure surplus in the hands of the people as well as of corporates, ease of doing business at the lower level and availability of land.
“We need private sector investment in a big way in the manufacturing, agriculture and infrastructure sectors. We cannot be totally dependent on the government to provide all the capital,” he said.
Kumar added that the corporate tax rates in the country have been made reasonable by the government and one should not complain about it.
He said despite a number of reforms undertaken by the government, the investment-to-GDP ratio has not improved.
According to him, there is a willingness to take tough decisions and initiate tough reforms at the central government level but when it comes to execution, there are issues due to bureaucracy.
Kumar said although the country’s ranking in ease of doing business has significantly improved; but at the district level, there are still challenges in getting permissions for setting up a new unit.
“If today, you or I want to set up a new unit in any district of our country, I am telling you that it will be a harrowing experience. All this ease of doing business will disappear when you go to the district level bureaucracy and want to start an enterprise,” he said.
Kumar further said there have been issues around risk management and pricing of risks as far as the banking sector is concerned.
He said the environment and the ecosystem around infrastructure is such that if a bank prices the risk of financing the infrastructure, it will not be able to lend over 16-17 per cent.
Due to the unpredictable policy environment in the country, where a policy can be changed overnight either by the government or state governments or local or judicial authorities, banks find it difficult to price the risks of financing the projects, Kumar added.