India will "struggle" to achieve 5 per cent GDP growth in 2020 as the significant deceleration in past few quarters was largely owing to credit squeeze which is a cyclical problem, said noted American economist Steve Hanke.
Mr Hanke, who currently teaches applied economics at Johns Hopkins University (USA), pointed out that India experienced an unsustainable credit boom, and now the chickens are coming to roost with a massive pile of non-performing loans piled up, primarily at the state-owned banks. "The slowdown in India is related to a credit squeeze, which is a cyclical problem - not a structural problem... As a result, India will struggle to make a GDP growth rate of 5 per cent in 2020," he said.
He also noted that India is already highly protectionist. India, which till recently was hailed as the world's fastest-growing major economy, has seen growth rate decline to a six-year low of 4.5 per cent in the September quarter of 2019-20. This has largely been attributed to the slowdown in investment that has now broadened into consumption, driven by financial stress among rural households and weak job creation.
Mr Hanke, who had served on former US President Ronald Reagan's Council of Economic Advisers further said that Modi government has failed to make any big economic reforms.
The economist opined that Modi government seems to have little interest in making tough and required economic reforms. "Instead, Modi government has focus on two things that are destabilising and potentially explosive: ethnicity and religion.
"This is a deadly cocktail. Indeed, many believe that under Modi, India is already being transformed from the 'world's largest democracy' into the 'world's largest police state'," the eminent economist, who is also a senior fellow and director of the Troubled Currencies Project at the Cato Institute in Washington said. E-mail queries sent to the Prime Minister's Office (PMO) seeking comments did not elicit any response.