August 16, Colombo (LNW):India is on track to potentially transform into a $55 trillion economy by 2047, contingent upon the aggressive implementation of growth-oriented policies by both state and central governments. This bold vision was outlined by Krishnamurthy V. Subramanian, Executive Director of the International Monetary Fund (IMF), during the launch of his book India @100 at the Indian School of Business (ISB).
Subramanian, who previously served as India’s Chief Economic Advisor, emphasized that while this target may seem ambitious, it is achievable if India maintains its current growth trajectory. Presently, the Indian economy is valued at approximately $3.25 trillion. Subramanian presented a roadmap to reach the $55 trillion goal, emphasizing the power of compounding growth.
Utilizing the “rule of 72,” which estimates the time required for an investment to double based on its annual growth rate, Subramanian explained how India’s GDP could double every six years with an 8 percent growth rate, a 5 percent inflation rate, and a 1 percent annual depreciation of the rupee against the dollar. This compounding effect could propel the Indian economy to nearly $52 trillion by 2047.
Subramanian drew parallels to Japan’s economic rise, noting Japan’s expansion from $215 billion in 1970 to $5.1 trillion in 1995—a 25-fold increase over 25 years. He argued that such rapid economic growth is feasible under the right conditions.
Despite India’s current private credit-to-GDP ratio of 58 percent in 2020, which lags behind advanced economies with ratios exceeding 200 percent, Subramanian highlighted the country’s progress in financial inclusion through initiatives like the ‘Pradhan Mantri Jan-Dhan Yojana.’ However, he stressed that achieving the $55 trillion economic vision requires more than just high growth rates.
Effective utilization of government borrowings, investments in physical infrastructure, enhancement of human capital, improvements in healthcare, and building digital capital are all critical components of sustained economic growth. Subramanian urged that government borrowings should be used to create long-term assets rather than funding subsidies or revenue expenditures.
As India approaches this potential new economic era, the journey towards becoming a $55 trillion economy will require strategic planning, robust policy implementation, and a collective effort from all sectors of society.
