New Delhi: The Indian economy is running the risk of a structural crisis, and could soon be ensnared in a “middle-income trap”, eventually becoming like Brazil or South Africa, according to Rathin Roy, member of the Prime Minister’s Economic Advisory Council and Director of National Institute of Public Finance and Policy.
Mr Roy’s comments come at a time of mounting concerns over an economic slowdown.The Ministry of Finance in its Monthly Economic Report of March 2019 warned that “India’s economy appears to have slowed down slightly in 2018-19. The proximate factors responsible for this slowdown include declining growth of private consumption, tepid increase in fixed investment, and muted exports.”
Mr Roy suggested the risk runs much deeper.
“We are heading for a structural slowdown. This is an early warning. The economy since 1991 has been growing not on the basis of exports… but on the basis of what the top 100 million of the Indian population wants to consume,” he said.
Those 100 million or 10 crore Indian consumers who were “powering” India’s growth story, he said, have started to plateau out.
“It means in short we will not be South Korea. We will not be China. We will be Brazil. We will be South Africa. We will be a middle-income country with large numbers of people in poverty seeing rising crimes. In the history of the world. Countries have avoided the middle income trap but no country once in it, has been able to get out of this,” he said