How To Realize The Potential Of A US$ 26 Trillion Economy

At a time when the global economy is buffeted by challenges of slow growth, inflation and conflicts in different parts of the world, the growth projections for the Indian economy are among the highest for any large economy in the coming decades.

Even as the government is brainstorming to create blueprints for the planned take-off, several leading business advisories, bankers and economists have been drawing up their own set of recommendations to aid the government in firming up plans.

The India@100 report by EY India and the India@2047 report by PricewaterhouseCoopers (PwC) both chalk out multi-line strategies, while well-known banker Uday Kotak has given his own set of financial prescriptions to ratchet up growth to an average of 9 per cent annually.

Kotak wrote on X, “Model for India’s dream: 9% annual growth, $30 trillion GDP by 2047. India is transforming from a nation of savers to investors. The tussle between the saver/borrower and issuer/investor model is underway.”

The EY report posits that ‘while maintaining a stable yet modest growth rate averaging about 6 per cent per annum, India would become a US$26 trillion economy (in market exchange rate terms) by 2047-48 (in nominal terms), with a per capita income exceeding US$15,000 (nearly six times the current value).’

N Chandrasekharan, executive chairman of Tata Sons, has been quoted in the report, stating, “This is a crucial decade for India to shape its own future, and even beyond, to chart a path for other developing countries in a global context that has been transformed by the pandemic, conflict and the generational fight against climate change.”

PwC India’s Partner and Leader, Economic Advisory Services Ranen Banerjee said in the report that over the last 75 years India has "created a strong economic base and is poised to achieve the status of a developed country over the next 25 years”, adding that PwC’s model has taken into account a 12 per cent annual nominal GDP growth (including inflation), a deceleration of 0.01 per cent population growth in a bloc of five years, and a rupee depreciation against the US dollar of 2 per cent annually till 2025 and then an appreciation 0.5 per cent in a bloc of five years.

How can we achieve this mission? The EY report envisions seven key enablers of growth that uniquely strengthens India’s position in the global economy over the next decade and beyond.

Digitalization: India’s large telecom subscriber base of 1.2 billion and 837 million internet users combined with a sure shot push by the government to build digital platforms like the India Stack and ONDC have ensured a unique Digital Public Infrastructure that is scalable and so robust that many countries like Australia and France have requested help in building such technology platforms apart from those in Africa. With wide-scale adoption of Unified Payments Interface (UPI) by 260 million unique users, “India accounts for the highest volume of real-time digital payments among businesses globally.”

Filling the credit gap: India’s debt to GDP at 55 per cent remains amongst the lowest among large economies globally. Even though the economy had large non-performing assets, it has slowly been reduced so much so that the MSME sector which has been under the weight of lack of credit (US$ 250-US$ 300 billion) can also be helped from now to raise credit.

Thriving entrepreneurship: India’s emerging start-up ecosystem is now the third globally. Over the past four years (since FY 2017-18), there has been 66 per cent year-on-year growth in the number of additional unicorns. Record levels of private equity of US$ 82 billion in FY 21-22 have enabled formalization of the economy which is reflected in the growing start-up ecosystem with over 84,000 recognized start-ups.

Building infrastructure of the future: After massive upgrades in roadways, the focus is now on rail, air, water transport along with the ‘Gati Shakti’ initiative which is aimed to improve intermodal visibility and synergies. Investment in physical infrastructure is being supplemented by policies like the National Logistics Policy.

Separately, mot leading economists have stressed on the infrastructure building exercise – not merely physical infrastructure but also social infrastructure – healthcare and education being the foremost of them.

PwC on its part has stressed the need to skill/upskill Indian youth to reap the demographic dividend of a young population.

“The median age of the Indian population is projected to be 31 in 2030 compared to 42 in China and 40 in the US, thereby making India a country with the largest working-age population in the world” points out Banerjee in his report.

Reaping the demographic dividend: Currently, about 67 per cent of India’s population lies in the working age group. Approximately 25 per cent of the incremental global workforce over the next decade will come from India. By 2030, India’s working-age population will exceed 1 billion. This is a huge market of aspirational youth in India that will be very attractive to multinational and Indian companies.

Make domestic manufacturing competitive: Growth in manufacturing would help create new job opportunities for the 43 per cent labour pool currently engaged in agriculture. Incentives under Production Linked Incentives (PLI), for example will help the manufacturing sector. a better quality of infrastructure, access to renewable energy and other factors. The Indian EV ecosystem is poised to see vehicles of 100 million by 2030.

Sustainable energy transition: Rising global temperatures represent an opportunity to develop businesses relating to new sources of energy. The government has set a target to be net zero by 2070. It has also set a target of 50 per cent of power generation capacity from non-fossil fuel sources by 2030.

Summing up, EY India’s Chairman and Managing Partner , Rajiv Memani said “the entrepreneurial spirit of the private sector and policy measures of the last few years in the domains of fiscal, digital, physical infrastructure and social inclusion has uniquely positioned India for higher and sustainable growth. India is already among the fastest growing economy globally and is now at an inflection point where a new era of growth drivers will emerge.”