Raghuram Rajan, former central bank chief of India, states that the country's 8.5% growth rate has some "fluff."
- According to former Reserve Bank of India Governor Raghuram Rajan, India's 8.5% economic growth rate has some 'fluff'.
- He stated on CNBC's "Squawk Box Asia" on Thursday that even a growth rate of 6-6.5% is considered a positive outcome.
- Rajan stated that one issue with GDP data is that it primarily reflects the growth of large firms, while smaller companies have only experienced "slow progress."
According to former Reserve Bank of India Governor Raghuram Rajan, India's economic growth rate has some 'fluff'.
He stated on CNBC's "Squawk Box Asia" on Thursday that even a growth rate of 6-6.5% is considered a positive outcome.
The Indian economy experienced a growth of 8.4% in the fourth quarter of the year, exceeding expectations, due to the strength of private consumption and manufacturing activity. Reuters had predicted a GDP growth rate of 6.6%.
Rajan, a professor of finance at the University of Chicago Booth School of Business, stated that the 8.5% has a bit of fluff in it.
The Indian government revised its GDP growth forecast for the upcoming fiscal year to 7.6% from the earlier projection of 7.3%.
One issue with GDP data, according to Rajan, is that it primarily reflects the performance of large corporations, while smaller businesses have only experienced "slow growth."
He predicted that when we adjust the GDP numbers to account for the slow growth of small firms, we will get closer to the 6-6.5% range.
The IMF executive director, Krishnamurthy Subramanian, stated on CNBC last month that India's annual growth rate is expected to be 8%, due to the government's increased capital expenditure over the past few years.
The finance ministry of India predicts that the country will be the third-largest economy globally by 2027, with a GDP of $5 trillion.
Rajan stated that it is important to be realistic about GDP numbers as they serve as the foundation for policy. If one believes they are growing at an incredible rate, there is no need to alter policy.
India has been labeled "the world's fastest-growing major economy" by the International Monetary Fund, with "public investment" serving as a crucial catalyst.
To create jobs and increase the labor force, Rajan stated that India's private sector investment "must increase strongly."
"Despite the excitement surrounding India's growth, private Indian companies are not investing at a higher rate than they have previously."
According to CNBC's Shreyashi Sanyal, Bhargav Dasgupta, vice-president (Market Solutions) at the Asian Development Bank (ADB), reportedly stated last month that growth in private investments in India was "very visible," and the bank was also looking to scale up its investments in the country.
Asia Economy
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