India can unlock 8-9 per cent economic growth by accelerating structural reforms to reduce the cost of doing business and the cost of financing, former Chief Economic Adviser Krishnamurthy V Subramanian said on Monday.
He called for implementing factor market reforms in land, labour, and capital, as well as judicial and bureaucratic reforms.
"Macroeconomic stability got India to 7 per cent growth. Institutional reforms can take India to 9 per cent," Subramanian said told PTI in an interview.
"India achieved above-8 per cent growth when private investment as a share of GDP was more than 30 per cent. We are currently at around 22-23 per cent, 7-8 per cent short of the target," he said.
"We will then leapfrog from 7 to 9 per cent growth!" Subramanian said, adding that the public capital expenditure of the last five years has laid the infrastructure that private investment follows, and the banking system with gross NPAs near multi-decade lows is ready to support it.
Subramanian, who served as India's 17th Chief Economic Adviser from 2018 to 2021, and later as Executive Director at the International Monetary Fund, recently became the first Indian economist to receive the University of Chicago's Alumni Award for Professional Achievement in the institution's 85-year history.
The award has previously been conferred on more than a dozen Nobel laureates and other distinguished global leaders.
The eminent economist noted that India's macroeconomic foundations are strong and falling crude prices provide a near-term tailwind.
"… What takes us from 7 to 9 per cent growth is the next wave of reforms: factor market, judicial and bureaucratic reforms that reduce the cost of doing business, and the cost of financing," he said.
Earlier this month, Asian Development Bank lowered India's GDP growth projection to 6.6 per cent as against 6.9 per cent estimated earlier for the current fiscal on concerns of higher energy prices fuelled by the West Asia crisis.
On artificial intelligence, Subramanian identified open-source frontier models as a strategic inflection point.
"The arrival of Kimi AI, which now matches leading proprietary models, is a huge opportunity India must not underestimate," he said.
"India need not build the next ChatGPT. India must become the world's most effective deployer of AI across healthcare, education, manufacturing, MSMEs, and most importantly public administration and regulation. Rapid and intensive deployment will determine productivity growth. That is the race to win for India," Subramanian said.