Making sense of India’s GDP growth promises
Narendra Modi says India will become the third largest economy during his “third" term. Standard Chartered sees India’s gross domestic product (GDP) at $6 trillion by 2030 and per capita income at $4,000 by then. Several other projections put India on a similar track over the next 10 years.
However, a closer look reveals none of these estimates really imply India growing any faster than it is already growing—and these would turn true even if it remains stuck in the 6-7% growth range. S&P Global Ratings has projected a 6.7% annual growth rate between 2023-24 and 2030-31. This level of consistent growth will certainly keep India’s tag of the fastest-growing emerging economy, but it won’t be enough to meet the dream of becoming a developed economy by 2047, India’s centenary year of independence.
In a special report titled ‘India @ 100’, the Reserve Bank of India has projected that the country’s real GDP will have to grow 7.6% per annum for the next 25 years, raising its current per capita GDP of $2,500 to $22,000, to join the developed economy club. Medium-term projections largely put growth at around 7% or less for the next eight to 10 years. But even in the past, despite the much-praised high-speed growth rate following economic liberalization, India never has had a consistent 7%-plus growth rate.
“India’s potential growth is just over 7%, provided the investment rate remains above 30% of GDP," said N.R. Bhanumurthy, vice chancellor at Dr. B.R.
Ambedkar School of Economics University. “Growth is a necessary condition but not necessarily a sufficient condition to take care of the world’s largest population. We need more inclusive growth, that is development leading to more jobs." In the three decades since the 1990s,
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