‘We are not a big market’: Former CEA Arvind Subramanian calls domestic base peg a ‘fatal’ error

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Former chief economic adviser Arvind Subramanian said India must ‘disabuse’ itself from the fact that it is a big market, “we are not a big market,” he stressed.  

Subramanian was speaking at the India Today conclave.

To a question by Business Today’s Executive Director Rahul Kanwal if India was big enough market to manufacture for India, he said the country was making a mistake by assuming it can grow based on the domestic market, which “I think is a fatal error of judgement.”

“No country in the post-war period…China, Vietnam, Bangladesh ever achieved 7-8% growth without 15% growth in manufacturing exports. And you cannot get that from the domestic market,” he said.  

Subramanian also found government’s GDP “mystifying”. “I can’t understand the latest GDP numbers, they are mystifying, and don’t add up. For example, the implied inflation numbers given by the government are between 1-1.5%, but the actual inflation is around 3-5%.”

He also pointed out that while the economy was growing at 7.5%, private consumption was lagging at 3%.

As per the latest GDP numbers, the Indian economy grew at a rate of 8.4 per cent in the third quarter of the financial year of 2024, a six-quarter high.

Moreover, the GDP figures for the first and second quarters of the ongoing financial year were revised to 8.2 per cent and 8.1 per cent, up from 7.8 per cent and 7.6 per cent respectively.

Subramanian, who served as the chief economic adviser from October 2014 to June 2018, also flagged that foreign direct investment (FDI) had declined very sharply in the last two or three quarters. “It’s not just India’s FDI coming down, but also India’s share of global FDI going to emerging markets has also come down. So the question is, if India has become such an attractive place to invest, why isn’t there more FDI? Corporate investment is also well below 2016 levels,” he said.



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