India's real GDP at 5% is good, not very low, when rich countries are doing at 2%. China is growing a little better at 7%, exports are an advantage. Believe me their nominal GDP must be much higher...
To be more exact, INDIA’s nominal GDP growth rate is equal to real GDP plus inflation means, 5% + 10% (inflation, CPI) = 15% which is not sustainable because inflation is too high, Income, consumption, and saving/investment is lagging behind. It is so high that no bank is giving 15% interest on savings a year. Bank is increasing income 8% a year. However, public and private spending is rising under compulsion price-rise…
In the long run when inflation is assumed zero, real GDP growth rate will equal nominal GDP growth rate in equilibrium. The long run potential GDP growth rate of the Indian-Economy is 12% because its population growth rate is 17% (every ten year), and, deducting frictional unemployment of 5% it comes to 12%, the rate of growth of labor force and employment to maintain full employment. Therefore India's full-employment long-run potential growth rate is 12%. And, under equilibrium full-employment long run potential GDP growth rate (12%) = nominal GDP growth rate (12%) = real GDP growth rate (12%). But, the situation is 12% = 15% = 5%.
The last one, the real GDP growth rate is a long run goal. In the short run we have achieved the target with nominal GDP growth rate at 15%. Indian economy is at full employment with all the supply side constraints. In 2012 the unemployment rate for Indian-Economy fell to 3.8% which is why inflation is so high and persistent. We can not achieve 12% real GDP because we can not tolerate inflation above 10%. The benchmark we have set for our selves. We need patience. No doubt inflation is the major problem…
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