Subramanian used Japan as a benchmark, emphasizing that its economy grew from $215 billion in 1970 to $5.1 trillion in 1995, an almost 25-fold increase in 25 years.
According to Krishnamurthy V. Subramanian, Executive Director of the International Monetary Fund (IMF), India's economy could potentially grow to $55 trillion by 2047 if state and central governments take consistent measures to increase the country's growth rate to 8 percent (in rupee terms) from its historical average of 7 percent.
Launching his book, India @100, at the Indian School of Business (ISB) in Hyderabad on Monday, Subramanian acknowledged that while the goal of achieving a $55 trillion economy by 2047 may seem ambitious, it is achievable. He noted that India's private credit ratio stood at 58 percent in 2020, well behind developed countries where it has reached 200 percent.
He, however, stressed that remarkable progress was being made in financial inclusion through initiatives like the Pradhan Mantri Jan-Dhan Yojana.
“In other words, this may seem bold, but it is the compound interest effect that makes it possible. If we can achieve 8 percent growth, we can actually build a $55 trillion economy,” said the former chief economic adviser.
India’s GDP growth rate: The “Rule of 72”
Subramanian, relying on the “rule of 72,” explained that if the dollar grew at an annual rate of 12 percent – consisting of 8 percent GDP growth, 5 percent inflation and a 1 percent depreciation of the rupee against the dollar – GDP is expected to double every six years. Applying this principle over a period of 24 years starting in 2023, he predicted that the current $3.25 trillion economy would experience “four doublings” and reach $52 trillion by 2047.
Taking Japan as a benchmark, Subramanian pointed out that its economy grew from $215 billion in 1970 to $5.1 trillion in 1995, an increase of almost 25 times in 25 years. During this period, per capita GDP rose from $2,100 to $44,000. He stressed the importance of using government bonds wisely, pointing out that investments should be geared towards creating assets, not just financing subsidies or operating expenses.
He stressed that beyond physical infrastructure, India needs to invest in improving human capital, healthcare and digital infrastructure as these are essential government responsibilities.
(With agency contributions)
First published: August 13, 2024 | 1:35 p.m. IS
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