Sustained growth for job creation: Witnessing an  8 per cent growth on a sustained basis will help India to create sufficient jobs and diminish poverty and inequality, says India's Executive Director at International Monetary Fund (IMF) Krishnamurthy Venkata Subramanian. The Indian economy witnessed a growth of better-than-expected 8.4 per cent in the final three months of 2023, the fastest pace in one-and-half years.

"There has to be a sense of impatience even if we grow at 7 per cent. There has to be a growth at 8 per cent and above, as India 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 Chief Economic Advisor 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. As per Subramanian, the RBI has projected GDP growth for FY25 at 7 per cent on the back of improved household consumption and upturn in the private capex cycle.

Growth projections 

Subramanian said India has aped 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.

Subramanian highlighted the Reserve Bank's projection of 7 per cent GDP growth for the upcoming financial year, attributing this optimism to improved household consumption and a resurgence in private investment.

Questioning the relevance of targets such as reducing the fiscal deficit to 3 per cent and the debt-to-GDP ratio below 66 per cent, Subramanian argued that India's economic context differs significantly from Western models. He noted that these benchmarks originated from the Maastricht Treaty signed in December 1991, aiming to foster fiscal and monetary union among European nations, a framework incongruent with India's economic reality.

Furthermore, Subramanian highlighted the substantial size of India's platform economy, ranking third globally after the US and Europe. He pointed out the need for India to recalibrate its economic strategies, considering its unique developmental challenges and opportunities, distinct from those of Western economies.

(With PTI inputs)