 "Economic growth, GDP")
India will join the coveted club of upper-middle income countries by FY36, a report by India Ratings and Research said on Monday. And by FY47, it will become a $15 trillion economy, the ratings agency’s report estimated.
In January, while addressing the Vibrant Gujarat Global Summit, Finance Minister Nirmala Sitharaman had said that making India a $30-trillion economy by 2047 is a “conservative” estimate.
But the agency, in its report, said that Indian economy will have to grow at 9.7 per cent per annum over FY24-FY47 to meet that target. Something that will be difficult, if not impossible, to achieve given the global upheaval.
The agency said that the target of reaching $30 trillion by 2047 would be not easy and a lot would depend on how the global and domestic macroeconomic environment unfolds.
A recent report by rating agency CRISIL had said that India will become an upper middle-income country and nearly double its economy to $7 trillion, piggybacking on significant private investments in emerging sectors, continuing government spending on infrastructure build-up, ongoing reforms push and efficiency gains from increasing digitisation and physical connectivity.
“The onward journey of the Indian economy from India Ratings and Research estimated $3.6 trillion dollars in FY24 will depend on the rate at which the real GDP growth, inflation (GDP deflator) and INR/USD exchange rate evolve,” Sunil Kumar Sinha, Senior Director and Principal Economist, India Ratings and Research said.
Until 2006, the World Bank had put India in the low-income country club. In 2007, India moved to the lower-middle income country. Since then, the country is wedged in the same club. India’s per capita GDP stood at $2,390 in 2022, Ind-Ra said.
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Citing only two instances in the last 50 years when the economy grew higher than 9.7 per cent per annum in USD terms for a period of 10 years: 1973-1982 and 2003-2012, Ind-Ra report said, “Cross country experience of 50 years suggests that it is difficult to maintain and sustain such high rate of real GDP growth in USD terms as the economy starts maturing.”
It said that the Indian economy is showing robust growth, but no major economy has been able to grow 7 per cent per annum on a sustained basis without the support of global demand and trade.
“Unfortunately, global demand and trade have become fairly restrictive FY12 onwards. It started with developed economies adopting protectionist trade practices in the aftermath of the global financial crisis which post Covid-19 has evolved into trade fragmentation/near-shoring/friend-shoring,” the report said.
The urgency of meeting climate related commitments, the report added, is driving developed economies to bring changes in their trade policies, both in the form of tariffs and non-tariff measures.
Ind-Ra, however, expects India’s commitment to energy transition to open a number of new growth areas, encompassing products and services in renewable energy, power storage, power distribution and grid infrastructure.
Expansion of the middle-income class, driving demand for a wide range of goods and services would also act as a growth engine for India, the ratings agency said.
