If India can achieve its ambitious but attainable goal of registering an average real growth rate of 8% in the upcoming years, its economy is expected to increase to $55 trillion by 2047, according to IMF managing director Krishnamurthy V Subramanian.
Speaking at a media gathering here, he stated that 8% growth is doable given the demographics of the nation and the government policies that have been put in place over the past ten years to increase the growth rate, such as innovation, entrepreneurship, and public digital infrastructure.
When it comes to entrepreneurship, World Bank data indicates that new business development increased starting in 2014. Consequently, he said, India now boasts the third-largest entrepreneurial ecosystem globally, which would support the rise in productivity in the official sector.
He went on to say that since the informal sector makes up between two thirds and three quarters of the Indian economy and informal sector businesses are significantly less productive than formal sector ones, the fast-paced formalization of the economy will increase productivity.
“India’s productivity growth is expected to be significantly influenced by formalization, which is already taking place due to the extensive public digital infrastructure,” the speaker continued.
The top IMF official responded to a question regarding the World Bank’s assertion that India will need 75 years to catch up to the US in terms of per capita income by stating that the term “middle income” is quite broad and that a country can fall into the middle-income trap even if its GDP per capita increases by two, three, or four times.
He also emphasized the need for manufacturing expansion in order for nations to break free from the middle-income trap and the need of including a sunset clause in any industry-specific subsidies.
The IMF increased its prediction for India’s GDP growth in 2024–25 last month from 6.8% to 7% due to “improving private consumption, particularly in rural India.”
“The forecast for growth in India has also been revised upward, to 7 per cent, this year, with the change reflecting carryover from upward revisions to growth in 2023 and improved prospects for private consumption, particularly in rural areas,” the International Monetary Fund stated in its World Economic Outlook report.
