Former RBI Governor Raghuram Rajan has said he is “worried” about the sequential slowdown in the country’s economic growth. He said the key question is what Indian growth will be in the fiscal 2023-24.

“The latest Oct-Dec India GDP numbers (4.4% on year ago and 1% relative to the first quarter) suggest slowing growth from the heady numbers in the first half of the year,” he said during an interview with a news agency.

As per the former RBI governor, the central bank has projected an even lower 4.2% growth of the Oct-Dec quarter relative to the similar pre-pandemic quarter 3 years ago is 3.7%. “This is dangerously close to our old Hindu rate of growth! We must do better.”

India’s economy grew 4.4% in the October-December quarter of the financial year 2022-23. The further moderation in GDP is seen in the light of the Reserve Bank of India’s (RBI) aggressive rate hike stance to contain high inflation levels. The slowdown in exports and low consumer demand also contributed to low GDP growth in the said quarter.

On the RBI’s decision to keep monetary policy tight, the former RBI governor said the apex bank has to do what it takes to not lose control of inflation. “We must note that CPI inflation is above the RBI’s target range, and core inflation, which is more persistent, is high.”

India’s retail inflation jumped to 6.52% in January 2023 from 5.72% in December 2022, breaching the Reserve Bank of India’s (RBI) upper tolerance limit of 6%.

While urban inflation rose to 6% in January compared with 5.39% in the previous month, rural inflation soared to 6.85% last month from 6.05% in December 2022. In the food basket, the inflation rate for vegetables contracted by 11.70% in January while that for cereals rose by 16.12%.

Is there a chance that India can become a large economy without a robust manufacturing base? Rajan thinks growth in manufacturing must be achieved, not through extravagant subsidies but by creating the right business environment, and easier access to inputs like land and labour. “I work with the government of Tamil Nadi. The manufacturing industries of the future that we want to attract are not asking for subsidies but for high-quality trained workers.”

On the issue of some Congress-ruled and opposition-ruled states in the process of implementing the DA-based old pension scheme, Rajan says such schemes do involve “massive future outlays” because of the indexation of pensions to current salaries. “State governments have to think through the long-term implementations for government finances…it may be infeasible technically or legally to move back to the old pension scheme.”