Aspirational GDP growth of 8%: The big challenge we must meet

We will need strong domestic savings plus policies that support local demand, enhance productivity and aid macro stability

- NIRANJAN RAJADHYAKSHA

There has been welcome talk in recent days about raising the bar on economic performance. Finance minister Nirmala Sitharaman said in the course of her opening remarks at the Kautilya Economic Conclave that the Indian economy needs to grow at 8% a year if we have to reach the goal of becoming a developed country by 2047, the centenary of our independence.

In his statement after the latest monetary policy was announced, Reserve Bank of India Governor Sanjay Malhotra noted that economic growth continues to be below our aspirations. This is not the first time that he has spoken about an aspirational growth rate, which is quite different from the potential growth rate that policymakers usually focus on. The latter tells us what is possible right now, given the growth in capital stock, labour force and productivity. The former is based on ambition for the longer term.

These two statements by the finance minister and the central bank governor come against the backdrop of an economy that has till now maintained its recent growth momentum, along with low inflation as well as a comfortable external situation, despite turbulence in the world economy. However, there is always the risk of such relative outperformance leading to a form of hubris that could bury the stark facts about the faster growth rate required to reach the Viksit Bharat goal by its deadline. India’s two most important economic policymakers thus did well to look beyond the economy’s immediate achievements.