India's $55 trillion economy goal ambitious yet attainable: IMF executive director
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India's economy could potentially reach a $55 trillion mark by 2047, provided the country achieves an average real growth rate of 8% in the coming years, according to Krishnamurthy V Subramanian, the IMF's executive director.
Speaking at a media event in New Delhi, Subramanian described the 8% growth target as ambitious but achievable, considering India's demographic advantages and the government's strategic initiatives over the past decade, including the expansion of public digital infrastructure and the promotion of innovation and entrepreneurship.
Subramanian highlighted the surge in new firm creation since 2014, as reflected in World Bank data, which positions India as the world's third-largest entrepreneurial ecosystem. This boom in entrepreneurship is expected to drive productivity growth, particularly in the formal sector.
He also emphasized the rapid formalization of India's economy as a crucial factor for enhancing productivity. Currently, a significant portion of the Indian economy operates informally, where productivity is generally lower compared to the formal sector. The ongoing shift towards formalization, aided by the extensive public digital infrastructure, is seen as a key driver of future productivity growth.
Addressing concerns related to the middle-income trap, Subramanian acknowledged the World Bank's projection that it could take India 75 years to reach one-fourth of the U.S.'s per capita income.
However, he pointed out that the middle-income range is broad and that even significant increases in GDP per capita may not immediately lift a nation out of this trap. He stressed the critical role of manufacturing growth in helping countries escape the middle-income trap and underscored the importance of implementing sunset clauses for industry subsidies.
The IMF recently revised India's GDP growth forecast for 2024-25 upwards to 7%, up from the earlier projection of 6.8%. This adjustment was attributed to "improving private consumption, particularly in rural India." The IMF's World Economic Outlook report noted that this growth forecast reflects the positive momentum carried over from 2023 and enhanced prospects for private consumption, especially in rural regions.
