India’s economy is projected to reach $55 trillion by 2047 if it maintains an average real growth rate of 8 per cent, an ambitious but achievable goal, according to IMF Executive Director Krishnamurthy V Subramanian.
At a recent media event, Subramanian explained that the 8 per cent growth target is feasible given India’s demographics and government policies, such as improvements in public digital infrastructure and support for innovation and entrepreneurship.
“If you take entrepreneurship, World Bank data shows that new firm creation surged from 2014 onwards. As a result, India has the third-largest entrepreneurial ecosystem in the world, which will help with the productivity growth in the formal sector,” he said.
He also highlighted that the rapid formalisation of the economy is expected to boost productivity, as between two-thirds to three-quarters of the Indian economy remains informal, with informal sector firms being less productive than their formal counterparts.
“Formalisation is going to be a key driver for productivity growth in India, which is already happening through the (vast) public digital infrastructure,” he added.
Responding to concerns about the World Bank’s claim that India could take 75 years to reach one-fourth of the US’s per capita income, Subramanian noted that the definition of middle income is broad and even with significant increases in GDP per capita, nations can still find themselves in the middle-income trap. He stressed that manufacturing growth is crucial to escaping this trap and underlined the need for sunset clauses for industry subsidies.
The IMF has recently revised India’s GDP growth forecast for 2024-25 to 7 per cent, up from 6.8 per cent, due to “improving private consumption, particularly in rural India.” The forecast adjustment reflects carryover from upward revisions to growth in 2023 and enhanced prospects for rural consumption, according to the IMF’s World Economic Outlook report.
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