'Modi govt's USD 5-trillion GDP target by 2024 looks unimaginably ambitious'

India would need to grow at 9 percent to achieve the target of USD 5 trillion economy by 2024, which currently looks "unimaginably ambitious", eminent economist R Nagaraj said on Sunday. Soon after assuming office for the second term in May 2019, the Narendra Modi-led government set a target of taking the economy to USD 5 trillion over the next five years.

But there have been several clouds over the economy since then, leading many to question the maintainability of the target. India's GDP is currently estimated at around USD 2.8 trillion.

"The target appears exceptionally daunting, if not impossible, going by the record of the current decade. Last July, as per my estimate, India needed to grow on average at 9 percent per year in real terms from the fiscal year 2020 to 2024 to achieve the target of 5 trillion dollar economy. "With the growth rate slumping, the goal looks unimaginably ambitious," Nagaraj, a professor of economics at the Indira Gandhi Institute of Development Research (IGIDR), told PTI.

India's GDP growth is seen dipping to an 11-year low of 5 percent in the current fiscal, mainly due to poor showing by the manufacturing and construction sectors, as per government data. Gross Domestic Product (GDP) growth in the first quarter of 2019-20 was 5 percent, which further slipped to 4.5 percent in the subsequent three-month period.

Talking about rising trade tensions, he said the prospects of a reversal in declining trends look very unlikely. "India's exports to GDP ratio has steadily declined since the early 2010s. So, I don't see any signs of reversal of the declining trends," he said.

Asked whether a fiscal stimulus is the only way out of the slowdown, Nagaraj said that lowering of interest rates over the last few years has not helped and there is a need for fiscal stimulus. On the upcoming Budget for 2020-21, he said, "I hope the Budget targets a high and rising investment to GDP ratio for the next 3-4 years with credible budgetary figures, and with a bright, implementable strategy in place."