India to become USD 55 trillion economy by 2047 if it grows at 8 pc annually: IMF Executive Director KV Subramanian
Aug 01, 2024
New Delhi [India], August 1 : KV Subramanian, Executive Director of the International Monetary Fund (IMF) and former Chief Economic Advisor of India, said on Thursday that India could become a USD 55 trillion economy by 2047 if it maintains an 8 per cent annual growth rate.
In an exclusive interview with ANI, Subramanian stated, "I'm predicting India to become a USD 55 trillion economy if it can grow at 8 per cent per annum from now until 2047 when we celebrate the 100th year of independence."
He acknowledged that this goal seems ambitious compared to other forecasts, such as Ernst & Young's prediction of USD 26 trillion for 2047 or Goldman Sachs' estimate of USD 50 trillion by 2075.
He added that if we account for all the macroeconomic divers, including the inflation-targeting by the government post-2016, which resulted in inflation reduction secularly by at least 2 per cent on average. This reflects significantly lower depreciation of the rupee vis-a-vis the dollar, and when it is added to the power of compounding, the prediction of USD 26 trillion is an underestimate.
On the USD 55 trillion-dollar target, Subramanian explained that if we assume 8 per cent growth in real terms with 5 per cent inflation, which has been the case since 2016 after the inflation targeting regime. That's 13 per cent, if the currency depreciation of 1 per cent because of the significantly lower rate of inflation, the currency depreciation will be much lower compared to the historical average of about 3. Then the growth rate will be 12 per cent.
"GDP will double every six years, you know, in dollar terms when we grow at 8 per cent. And therefore, if you look at the 24 years from 2023 to 2047, doubling every six years translates into four doublings. India's GDP in 2023 was 3.28 trillion. That's approximated to 3.25. So four doublings mean 3.25 to 6.5, which is the first doubling, 6.5 to 13, which is the second doubling, 13 to 26, which is the third doubling, and 26 to 52. I've given you an approximate number just close to the 55 trillion estimate." said Subramanian.
He also stated that the two economies ahead of India in 2047 will be the U.S. and China, and India's per capita income will be USD 40,000. Subramanian emphasized that with 8 per cent growth and controlled inflation, India can achieve that goal of USD 55 trillion-dollar economy by 2047.
