The target implies an output expansion by 84% in five years, or at 13% compound annual growth rate. Assuming the underlying technical coefficients remain constant, a 9% annual growth rate calls for 39% of domestic saving rate and 41.2% of investment rate. History shows that no country has succeeded in accelerating its growth rate without raising the domestic saving rate to close to 40% of GDP. The domestic saving rate has declined from 31.4% in 2013-14 to 29.6% in 2016-17; and gross capital formation rate from 33.8% to 30.6% during the same period. It may yet be doable, provided policymakers begin with a realistic assessment, by willing to step up domestic saving and investment, and not by the wishful thinking of FDI-led growth accelerations in uncertain economic times.

Source: The Hindu July 02, 2019 18:32 UTC