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 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.

Emphasizing 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.”

He further said, “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 prioritized” adding "it is up to 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 percent of GDP in 2012-13 to 1.6 percent of GDP in 2015-16.

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

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.

India's Current Account Deficit (CAD) remained low till 2008-09, but started rising thereafter, he pointed out adding despite a strong growth in export of goods and services CAD rose from USD 46 billion to USD 78 billion in 2011-12.

Observing that gold imports remained high at 54 billion dollars, Rangarajan said, "We must need to dissuade people from being attracted to the yellow metal."

(Agencies)

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