Intensify reforms, cut subsidies for economic recovery: C Rangarajan

RangarajanRangarajan said growth was the answer to many of the country's socio-economic problems

Underlining the need for pump-priming the economy by intensifying reforms and trimming subsidies, Prime Minister's Economic Advisory Council Chairman C Rangarajan today said if India grew at 8 to 9 per cent each year, per capita GDP would rise to USD 10,000 by 2025.

He said that if this growth rate was achieved "then India will also transit from being a low income to a middle income country".

The eminent economist and a former RBI governor was speaking on the subject "Indian Economy: Immediate Challenges and Medium Term Concerns" while delivering a lecture on NALCO's foundation day.

Emphasising the need to overcome the current low growth phase as quickly as possible, Rangarajan said growth was the answer to many of the country's socio-economic problems and several schemes aimed at broadening the base of growth had been launched recently.

Stating that raising savings and investment could take India back to the very high levels of growth seen earlier, he said taming inflation, containing current account deficit and ensuring fiscal consolidation were the major tasks requiring immediate attention.

While efforts must be made to raise revenue-GDP ratio, it is imperative to check expenditures, particularly subsidies which need to be pruned, well focussed and prioritised," Rangarajan says adding "it is upto the government to decide which subsidies must take preference over others."

What is needed is to have a fix on the quantum of subsidies to be provided as a proportion of GDP or of government revenue, he said referring to government's hint at reducing subsidies from 2.6 per cent of GDP in 2012-13 to 1.6 per cent of GDP in 2015-16.

"This calls for several policy actions which may not be popular, but such actions are needed," he said.

Regarding high inflation, Rangarajan said that for sustained high growth, price stability was a pre-condition and added that monetary policy and fiscal policy had to play their part in containing overall demand pressures.

... contd.

Please read our terms of use before posting comments
TERMS OF USE: The views expressed in comments published on indianexpress.com are those of the comment writer's alone. They do not represent the views or opinions of The Indian Express Group or its staff. Comments are automatically posted live; however, indianexpress.com reserves the right to take it down at any time. We also reserve the right not to publish comments that are abusive, obscene, inflammatory, derogatory or defamatory.