Amid concerns over a fall in India’s economic growth capacity in recent years, noted economist and former US treasury secretary Larry Summers said on Saturday that 8% annual expansion is still an “imaginable goal” for India, but added that this would require changes in several of the current policies at the federal and state levels.
Stating that an eight-fold expansion of the Indian economy by 2050 could transform the lives of hundreds of millions of people, he said: “I think it is something to target as India defines its greatness in the next century.”
He was delivering a lecture on ‘The World is on Fire’ at an event organised by the CII in partnership with the Department of Economic Affairs here.
The Finance Ministry and the Reserve Bank of India expect India’s economic growth to be around 6.5% in FY24 compared with 7.2% in FY23. The Indian economy grew 7.8% in the April-June quarter of the current fiscal on strong services sector activity and robust demand. India has set a target to become a developed nation by 2047, 100 years after its independence.
“I think this is a reasonable thing to say that a stretched target, an ambitious goal, a possible aspiration for India is an 8-fold growth between now and the end of the half-century,” Summers said.
He, however, quickened to add that grwoth of 8% a year wasn’t his “forecast on current policy,” but something that is possible given India’s potential even in the more challenging world economy.
“If I look at the initial level of GDP in India and at the countries that were able to maintain very rapid growth from that initial level for periods of several decades, that gives me a sense of the possibility (of 8% growth),” he said.
To achieve such growth rate, India has to remove barriers such as issues concerning “national government versus regional governments,” ranges of restrictions and problematic policies in a number of key regions in India, he noted. If these issues are addressed constructively, it would “unlock enormous potential.”
He also flagged issues with the (lack of) effectiveness of government in certain areas such as education. “A combination of free market forces addressing infrastructure needs, particularly in energy, addressing questions of reform in a number of key states and finally supporting a more effective public sector could generate growth at the rate that I suggested.”
Obviously. it is also going to depend very importantly on what happens in the global economy, he said, adding that India could help accelerate global growth through its expertise in information technology.
Talking about multilateral development banks (MDBs), Summers who is the co-convenor of the G20 Independent Expert Group on Strengthening MDBs, said that $20 billion of World Bank capital over the last 60 years helped it in providing $800 billion in lending. “If I put that $800 billion into today’s dollars, it would have been more than $2 trillion, that is an immense capacity to make a difference.”
He said mere continuity is not enough for the MDBs in a changed world that requires trillions of dollars in financing annually not only for traditional areas of poverty reduction and development goals but also addressing sustainability challenges.
“These institutions need to be transformed if they are to meet the challenges of a world on fire,” he added.
The expert group estimated an additional spending requirement of $3 trillion per year by 2030 to address urgent global challenges and sustainable development goals (SDGs). Of the $3 trillion annual requirement, $ 2 trillion could come from domestic resource mobilization while of the remaining $1 trillion, more than half could come from private financing, and the rest from official financing including MDBs.