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As the bottom 20 per cent of the Indian population is still poor, sound economic policies are required to drive a higher economic growth rate which will help reduce abject poverty in the country, said Former Finance Minister and Member of Parliament, P Chidambaram.
Releasing the book “Forks in the Road: My days at RBI and beyond,” authored by former RBI Governor and economist C Rangarajan, Chidambaram raised doubts over the claims of poverty reduction in India to a single digit. “It is only when you go into rural India – remote villages that are cut off from trades and services, that you will find deep-seated poverty in many parts of the country. I have witnessed this poverty and that is why I am very skeptical when I see those very optimistic estimates that say poverty has been reduced. “I think the bottom 20 per cent of India is still poor and very unequal and they are left with very little hope,” he added.
Price stability
He pointed out that price stability plays an important part in the reduction of poverty. Inflation hurts the poor more than the rich. Food, education, and healthcare are compromised because of deep-seated poverty. We must quicken the path toward the eradication of abject poverty, he said.
Quoting data from Rangarajan’s book, Chidambaram stated that the economic growth rates between 2004-05 and 2013-14 were much higher than the period since 2014-15. There is no reason why we should not aspire to achieve such growth rates. Sound policies through coordinated work of monetary authority and the government are needed to achieve high growth rates.
Cautionary note
He also highlighted Rangarajan’s caution on ICOR (incremental capital output ratio). “Dr. Rangarajan suspects that ICOR is at a higher rate. When it was about 4 and with an investment ratio of 32-35 per cent, we could achieve 8 per cent growth. While the investment ratio has fallen, it is perhaps the ICOR that has gone up that is recording a low growth rate.
N Vaghul, former Chairman of ICICI Bank, and Usha Thorat, former Deputy Governor of RBI, recalled the contributions of Rangarajan during the crisis period, while D Subba Rao, former RBI Governor discussed (over video conference mode) the role of Rangarajan in the formation of economic policies and reforms measures.
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