Highlighting the potential of the proposed US-India trade agreement to further liberalise the Indian economy and make it more attractive to investors, Arvind Panagariya, Chairman of the 16th Finance Commission, took the opportunity at an interaction hosted by New York’s Consulate General of India to discuss topical events including India’s race to become the world’s third-largest economy, its trade deals, and factors that aid Viksit Bharat goals.
Panagariya said he is “excited” about a lot of current developments, especially India’s ongoing negotiations with the US and the European Union (EU) on proposed trade deals, which are bound to boost access to Indian, American and European markets and attract investments.
The India-US trade agreement, which the chairman hopes will work out, will be a “big shot in the arm” for the Indian economy, he said.
“This is a tremendous opportunity for India, and it is very seriously negotiating the agreement with the United States. The most important thing is that it will result in greater liberalisation by India itself. Of course, better access to US markets vis-à-vis other competitors is a big plus,” Panagariya said.
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Calling the potential India-US and India-EU trade agreements “game-changers”, the economist further added, “India will have an open market with the two largest markets – the European Union and the United States. That will make India a very attractive location for future investors because any friction on the borders will melt away.”
Panagariya, an eminent Columbia University professor and former Vice Chairman of NITI Aayog, said he expects to hear the “good news” about India and the US cracking a trade deal with very soon, especially after US President Donald Trump, US Commerce Secretary Howard Lutnick, and US Treasury Secretary Scott Bessent expressed optimism about the deal finalisation before the August 1 deadline for imposition of high tariffs announced by Trump on April 2.
India’s Commerce and Industry Minister, Piyush Goyal, had also reportedly remarked in London recently that Delhi is making “fantastic progress” in trade talks with Washington.
In 2024, India’s total goods trade with the US was around USD 129.2 billion. The US exported goods to India that totaled USD 41.8 billion in the same year, which was up 3.4 per cent from 2023. However, India imported goods totaling USD 87.4 billion, leading to a trade deficit of 45.7 billion.
If a bilateral trade agreement between the two countries is successfully concluded, total trade between India and the US may increase to USD 500 billion by 2030, under the ‘Mission 500’ goal set by the two countries’ heads.
India’s talks with the EU are also on track, with Prime Minister Narendra Modi saying recently that India is working on finalising a “mutually beneficial” trade agreement with the EU by the end of this year.
Elaborating on the ‘Viksit Bharat’ vision that aims to turn India into a developed economy by 2047, Panagariya said that if India continues to maintain its current GDP growth rate, “we can get there”.
Panagariya noted that India’s GDP during the 2003-2017 period grew at a rate of 10 per cent per annum in real dollar terms; and at about 7.8 per cent annually up till 2024.
“If we can continue to grow at about 7.8 per cent, as we have done in the last 20-plus years, we can achieve our goal in the next 23-24 years,” he said.
The eminent economist said we may be closer to the goal with India’s per-capita GNI (Gross National Income) in 2024-25 being USD 2,740 as against the World Bank’s threshold per-capital GNI to achieve high-income country status being USD 13,995.
“The annual compound growth in constant dollars in per-capita GNI required to cross the World Bank threshold from this level is 7.3 per cent. With the population growth rate of 0.6 per cent, this per-capita GNI growth requires a GNI growth rate of 7.9 per cent,” he stated.
Panagariya said India’s high growth rate (8-10 per cent in current dollars) and significant gap between India’s per capita GDP and that of developed nations like South Korea, Singapore, the US, and Germany, are favourable factors that will help India become the third-largest economy by 2027.
Other aspects that work to India’s benefit include its large population that helps push the provision of public goods; a younger workforce; high-speed physical and digital infrastructure development, and digitisation of public and private transactions, he said.
With there being ample scope for economic reforms via implementation of new labour codes and spreading awareness on the importance of urbanisation, Panagariya emphasised that the biggest challenge facing the country currently is the transition from being a rural, agricultural economy to enhancing industrial and services sectors.
“Therefore, the creation of well-paid jobs in industry and services is the biggest challenge,” he said.
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