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Using Japan as a benchmark, Subramanian highlighted that its economy expanded from $215 billion in 1970 to $5.1 trillion in 1995, reflecting nearly a 25-fold increase over 25 years
India could potentially grow into a $55 trillion economy by 2047 if both state and central governments are diligent in enacting policies that elevate the nation’s growth rate from its historical average of 7 per cent to 8 per cent (in rupee terms), according to Krishnamurthy V Subramanian, Executive Director of the International Monetary Fund (IMF).
During the launch event of his book, “India @100” at the Indian School of Business (ISB) in Hyderabad on Monday, Subramanian acknowledged that the goal of reaching a $55 trillion economy by 2047 might seem ambitious, but it is within reach. He noted that in 2020, India’s private credit to GDP ratio stood at 58 per cent, a significant lag behind advanced economies where it has reached 200 per cent.
However, he highlighted the remarkable progress being made in financial inclusion through initiatives like the “Pradhan Mantri Jan-Dhan Yojana”.
“So in other words… While this of course appears to be audacious, it is the power of compounding that makes it happen. As long as we are able to register 8 per cent growth, we can actually become a $55 trillion economy,” the former chief economic advisor said.
India’s GDP growth rate: ‘The Rule of 72’
Subramanian, drawing on the “rule of 72”, explained that with a 12 per cent annual growth rate for the dollar — comprising 8 per cent GDP growth, 5 per cent inflation, and a 1 per cent depreciation of the rupee against the dollar — GDP is expected to double every six years. By applying this principle over a 24-year span starting in 2023, he projected that the current $3.25 trillion economy would experience “four doublings”, reaching $52 trillion by 2047.
Using Japan as a benchmark, Subramanian highlighted that its economy expanded from $215 billion in 1970 to $5.1 trillion in 1995, reflecting nearly a 25-fold increase over 25 years. During this period, GDP per capita surged from $2,100 to $44,000. Emphasising the importance of wisely using government borrowings, he noted that investments should focus on creating assets rather than merely funding subsidies or operational expenses.
Beyond physical infrastructure, he asserted that India needs to invest in enhancing human capital, healthcare, and digital infrastructure, which are essential responsibilities of the government.
(With agency inputs)
First Published: Aug 13 2024 | 1:35 PM IS
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