India Will Struggle To Achieve 5% GDP Growth In 2020: Economist Steve Hanke
India will "struggle" to grow at 5 percent of its gross domestic product in 2020 because the credit squeeze in the economy is a cyclical problem, American economist Steve Hanke has said.
Hanke, who currently teaches Applied Economics at Johns Hopkins University in the U.S., pointed out that India experienced an unsustainable credit boom, and now the chickens are coming to roost with a massive pile of non-performing loans piled up, primarily at the state-owned banks.
"The slowdown in India is related to a credit squeeze, which is a cyclical problem—not a structural problem. As a result, India will struggle to make a GDP growth rate of 5 percent in 2020," he told Press Trust of India in an interview.
He also noted that India is already highly protectionist.
India, which till recently was hailed as the world's fastest-growing major economy, has seen its GDP growth rate decline to an over-six-year low of 4.5 percent in the July-September quarter of 2019-20. This was attributed to the slowdown in investment that expanded into consumption, driven by financial stress among rural households and weak job creation.
Hanke, who had served on former U.S. President Ronald Reagan's Council of Economic Advisers, further said that the Narendra Modi government has failed to make any big economic reforms. According to him, the government seems to have little interest in making tough and required economic reforms.
"Instead, the Modi government has focus on two things that are destabilising and potentially explosive—ethnicity and religion,” the eminent economist, who is also a senior fellow and director of the Troubled Currencies Project at the Cato Institute in Washington, said.
"This is a deadly cocktail. Indeed, many believe that under Modi, India is already being transformed from the 'world's largest democracy' into the 'world's largest police state',” he added.
Emails sent to the Prime Minister’s Office seeking comment did not elicit a response.