Sukumar Sah
WILL India herald its 100th year of independence by becoming a $50-trillion economy? The target of achieving the landmark by 2047 is an ambitious one and represents a significant increase from current levels.
As of 2024, India’s GDP is estimated to be $3.5 to $4 trillion. To reach $50 trillion by 2047, the country’s economy would need to grow at an extraordinarily high rate over the next two decades. However, economist Arvind Panagariya, Chairman of the Sixteenth Finance Commission, and others of his ilk remain sanguine that the ambitious goal is achievable.
Panagariya, former Vice-Chairperson of Niti Aayog, believes that India can achieve a $50-trillion economy status by leveraging its young population, favourable geopolitical conditions, and enhancing per capita income in the coming decades. He emphasises that India, which has grown at an annual rate of 10 per cent in current dollar terms, is on track to reach a $32 trillion economy by 2047. However, he urges the country to set even higher goals.
Per capita income
One key area of focus is India’s per capita income, which is currently low but has significant potential for growth. The increase in income, coupled with the favourable geopolitical climate and demographic advantages, positions India to catch up with advanced economies.
Panagariya also advocates for further economic liberalisation to unlock India’s trade potential. He points out that while India is an open economy, there is considerable room for reducing high tariffs, which could bolster trade and economic growth.
Additionally, the West’s ‘China Plus One’ policy, which encourages diversification of supply chains away from China, offers India a strategic opportunity to enhance its growth rate by attracting more manufacturing investments.
Furthermore, Panagariya stresses the importance of developing labour-intensive industries to capitalise on India’s large workforce. He is optimistic about the new labour codes enacted in 2019-20, which he believes will remove barriers to the growth of these sectors. However, he also highlights the need for reforms in land policies, particularly in urban areas where land is costly.
Favourable demographics
Krishnamurthy V. Subramanian, Executive Director at the International Monetary Fund (IMF), endorses Panagariya’s assessment.
He suggests that India could become a $55-trillion economy by 2047 if it sustains an average real growth rate of 8 per cent with inflation around 5 per cent.
Subramanian acknowledges that this target is ambitious but achievable, especially given India’s favourable demographics and policy measures, such as the public digital infrastructure, a thriving entrepreneurial ecosystem and efforts to formalise the economy for boosting productivity.
