He also said it will be only investment and not consumption that will help the economy grow, explaining that the latter boosts an economy with a higher per capita income of say USD 10,000 or more.
The comments come amidst increasing criticism both from the corporate world as well as by analysts and economists outside the government about the issues plaguing the economy, and many a sector like the auto sending SoSes for help.
Comparing the private sector, which benefited the most from the 1991 reforms, to a grown-up man, he said, “this 30- year-old man and must start to stand on his own feet. This adult cannot keep asking his father for help and live with the idea of personalsing profit and socializing losses.”
“We need to move on; we’re a market economy, where assets do get reallocated when someone doesn’t manage it well,” he told an event organised by Jana Small Finance Bank this evening.
Pointing to an op-ed article by fellow economist Arvind Panagariya about the current economic situation, he sought to drive the point of motivations while the private sector makes pleas for help and called for the need to inculcate “good habits” in the private sector.
Meanwhile, in a different take on what should drive economic growth, Subramanian pitched for a move away from consumption which has fuelled growth for the last decade and refocus on investment which has been falling for the six to seven years.
Talks about consumption driving demand works very well where the economy crosses the USD 10,000 per capita threshold, but below that level its is investment that will drive growth, he said.
“Consumption acts like a force-multiplier, but it isn’t the key driver of growth in a low-per capita economy but it’s investment what is really critical to create jobs and for that we need investments, particularly by private sector.”
Subramanian also sought to blame the previous UPA government for the current mess in the economy saying the past government did not carry out enough structural reforms. But he was quick to add that the present government is solidly focused on growth.
He said the lack of transmission suggests that banks are independent and not governed by fiats from the government, he said.