Don't count on a growth miracle

In a volatile global landscape, sustained growth rate of more than 7 per cent is quite a challenge

- TT RAM MOHAN

The recent Budget has assumed real gross domestic product (GDP) growth of 6.5 per cent for FY25. The latest Economic Survey forecasts growth of 6.5-7 per cent. Would-be reformers in India are asking for more. They urge the government to do whatever it takes to boost GDP growth to 8, 9 or even 10 per cent. Aiming for a higher growth rate has become a sort of test of the government's machismo.

The gratifying part of current growth aspirations is that there is a sense all around that a long-term growth rate of 6.5 per cent for India is achievable. Yet, few had forecast such an outcome, least of all after the Covid pandemic struck India in March 2020.

For years, commentators warned us that a growth rate higher than 56 per cent would not be possible unless the government summoned the will to push through "secondgeneration" reforms. The slowdown in growth during the three years preceding the pandemic seemed to confirm these apprehensions.

None of those reforms have happened. Yet, the economy grew at over 7 per cent for three years after the pandemic and is now poised for a fourth year of growth close to 7 per cent.

In FY24, as the Economic Survey points out, the Indian economy returned to the pre-pandemic growth trajectory. This is an impressive feat. The US returned to the trajectory even earlier, then veered off and returned to the trajectory a second time. Europe is yet to get back to the pre-pandemic growth trajectory. China got back very quickly to the pre-pandemic trajectory but has since departed from it. India's recovery appears more surefooted. That is something to celebrate.

High growth rates after the pandemic have been driven by rising capital expenditure at the Centre.