C Rangarajan, principal of ICFAI Foundation for Higher Education (IFHE), said there is a need to increase the gross fixed capital formation (GFCF) from the current 29 per cent of the gross domestic product (GDP) to 32 per cent to achieve higher growth.
Addressing the 13th IFHE Congress on Saturday, the former chairman of the Prime Minister’s Council of Economic Advisers said the “first priority” was to increase growth rate.
“Our calculations suggest that if we sustain 7% growth over the next two decades or more, India may almost touch developed economy status,” Rangarajan said.
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This would require raising the GFCF to 32% of GDP from the current 29%, he added.
“If we also maintain ICOR between 4 and 5 (reflecting how efficiently we use capital), we can easily achieve 7% growth,” the economist said.
Rangarajan said India should absorb new technologies, adding that higher growth rates should create more jobs.
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“Employment improvements without economic growth are unsustainable. That is why we must aim for sustained growth of at least 7%,” he added.
Rangarajan described India as the world’s fifth-largest economy as “impressive” but noted that it was a “different” story in terms of per capita income and that there were still “travel distances”.
