Raghuram Rajan, former governor of the Reserve Bank of India, said there are some “fluctuations” in India’s economic growth rate.
That’s not a “pessimistic” reflection because “even 6-6.5% growth is a pretty good number,” he told CNBC’s “Squawk Box Asia” on Thursday.
India’s economy grew strongly at 8.4% in the October-December quarter, beating expectations due to strong private consumption and manufacturing activity. Reuters estimates GDP growth at 6.6%.
“The 8.5% figure is somewhat false,” said Rajan, now a finance professor at the University of Chicago Booth School of Business.
The Indian government raised its GDP growth forecast for the 2023-24 fiscal year to 7.6% from the previous 7.3%.
Rajan said one of the problems with the GDP data is that it mainly reflects India’s big businesses, while smaller businesses have only seen “tepid growth.”
“When we finally recalibrate the GDP numbers, given the modest small business growth, my guess is — we’ll be closer to 6-6.5 percent,” he said.
Last month, Krishnamurthy Subramanian, executive director of the International Monetary Fund, told CNBC that India’s annual growth rate is expected to be 8% as the government focuses on boosting capital spending, which Spending has increased significantly over the past few years.
India’s Ministry of Finance predicts that the country is expected to become the world’s third largest economy by 2027, with a gross domestic product of US$5 trillion.
“It’s good to be realistic about the GDP numbers because that forms the basis of policy. If you think you’re growing at an alarming rate, why change policy?” Rajan said.
The International Monetary Fund calls India “the fastest growing major economy in the world” and “public investment remains an important driver.”
But to maintain strong growth rates, India’s private sector investment “has to grow strongly” to create jobs and bring more people into the workforce, Rajan said.
“Despite the excitement about India’s economic growth, why aren’t Indian private businesses investing at a higher rate than before?” he added. “Everyone says they’re going to invest, but the reality is they haven’t invested enough so far.”
However, other experts also expressed different opinions. Bhargav Dasgupta, Vice President (Market Solutions), Asian Development Bank (ADB) It was reported last month that Growth in private investment in India is “very evident” and the bank is also looking to expand its investments in the country.
—CNBC’s Shreyashi Sanyal contributed to this report
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