Trillion Dollar Economy – no magic required

Reaching $ 5 trillion GDP benchmark is being projected as a landmark milestone for the Indian economy by many in the Government. The latest estimate puts the size of Indian economy, measured as GDP at current market prices, at $2.4 trillion. Does reaching $5 trillion mark reflect a significant achievement or is it really an implicit admission of incipient sluggishness in growth of Indian economy? Let the data speak.
Indian economy registered an average annual growth of 12.8% in GDP (at current market prices) during 17 years – from 2000-01 to 2016-17. During the same period, only in 2 years, the growth rate fell below 8%, the minimum being 7.6%. The 25 percentile growth rate was above two digits at 10.4% and the median rate was 13%.
Given this nominal growth scenario of recent past, dollar value 5 trillion appears to be too modest a goal to be set by the current government. Table 1 gives the projected value of Indian economy till 2035 under various growth rate scenarios. Even if Indian economy grows at the lowest rate achieved during last 17 years, the size of the economy would reach at least 4 trillion US dollar by 2025. If rupee depreciates in mean time the growth in dollar terms would be lower. At 70 rupees per dollar, the size would become only 3.9 trillion dollar by the end of 2025.
A nominal yearly growth rate of 7.6 percent would imply, given 4 % target growth rate notified by the government of India (GOI), a real growth rate of only 3.6 percent. A 10.4 % growth rate would thus imply real growth rate of only 6.4%. Thus if projections of $5 trillion is in nominal terms, then no big achievement is being claimed.
Suppose, all the projections are being made under the assumption of constant prices of 2016-17, then the target average growth for next eight years should be 9%. India has achieved a double digit real growth rate in the last 66 years only once. Even in the last 25 years India clocked a real GDP growth rate greater than 8% only 6 times. So the probability of clocking a real growth rate of more than 8% is as low as 25%. Achieving 9% uniform real growth rate till 2025 with stable rupee-dollar rate might be a chimera. If rupee depreciates to 70 rupees by 2025, we would need an average year over year real growth rate of 11%. It could be a dream worth pursuing but there is no evidence in terms of accelerated investment or growth in productivity that could make the dream a reality.
In summary, reaching 5 trillion USD by 2025 in nominal terms is no big deal – a lower than achievement would be considered a highly disappointing performance. Achieving the same target in real terms could be an enormous challenge- heralding a real structural break in the Indian economy with productivity led growth and not merely by adding more capital and labour.

Table 1: Projected USD Size of Indian Economy under various growth rate scenarios and with constant exchange rate of 63.5                      ($Trillion)

 Distribution Measures based on data from 2000-01 Compound Growth Rate of GDP at current market prices 2025 2030 2035
Minimum 7.6 4.2 6.1 8.9
1st quartile 10.4 5.2 8.6 14.1
Average 12.8 6.2 11.4 20.9
Median 13 6.3 11.7 21.5
Note: Only first decimal value without rounding up has been reported. Projections are based on CSO’s preliminary estimate of GDP at current market prices for year 2016-17.

Note: Only first decimal value without rounding up has been reported. Projections are based on CSO’s preliminary estimate of GDP at current market prices for year 2016-17.



Comments

23 responses to “Trillion Dollar Economy – no magic required”

  1. Asoke Chatterji avatar
    Asoke Chatterji

    Well more the merrier but its well known that long-term projections are always very risky particularly there are many issues like globalization versus protectionism remains unsettled . Secondly there can accelerators and retarders can develop in the economic systems emanating from the interplay of domestic and international economy . Finally linearity may not be appropriate tool for making forecast for such a long term. I am rather concerned about the growing disparity of income in India in the post liberalizations period even if Indian Economy reaches 5 trillion USD mark. God forbid, the way disparity of income is increasing,I am afraid there can social upheaval which may jeopardise all our calculations.

  2. moz avatar

    Fine way of describing, and good post to get facts regarding my presentation subject matter, which i am going
    to convey in college.

  3. chrome.google.com avatar

    Thanks for sharing your thoughts about blog. Regards

  4. zvodretiluret avatar

    Just desire to say your article is as astounding. The clarity in your post is just excellent and i can assume you are an expert on this subject. Well with your permission let me to grab your feed to keep up to date with forthcoming post. Thanks a million and please keep up the gratifying work.

  5. klearskyo92 avatar

    [url=https://klearskytesting.com/hr/kankusta-duo-nasi-cijena-kako-se-to-radi/]Kankusta duo posljedica[/url]

    You reported this effectively.

  6. houston no credit check loans avatar

    Hey this post certainly made me think! TY-I hadn’t thought of things from that angle otherwise.

  7. loans no faxing no credit check avatar

    Do you need to qualify that? :p

  8. furtdsolinopv avatar

    This website is mostly a stroll-through for all the info you needed about this and didn’t know who to ask. Glimpse here, and you’ll definitely discover it.

  9. loans no credit check no fees avatar

    I wonder about the bullet points.. maybe somewhat forced.

  10. Kendrick avatar

    Whoa! This blog looks exactly like my old one! It’s on a totally different subject but
    it has pretty much the same page layout and design. Excellent
    choice of colors!

  11. Yasmin avatar

    Undeniably consider that which you said. Your favourite reason appeared to be at the web the easiest factor to understand of.
    I say to you, I definitely get irked even as other people think about issues that they plainly don’t know about.
    You managed to hit the nail upon the top and outlined out the
    whole thing without having side-effects , people could take a signal.
    Will probably be again to get more. Thanks

  12. click here! avatar

    This article could say so much more 🙁 Are you intending to write more about it soon?

  13. go source avatar

    I get what you’re saying, but I need more info. Is it ok if I PM you?

  14. no credit check loans unemployed avatar

    10/10! Is there anything more I should look into next? Or is this good?

  15. Steelers Jerseys Cheap avatar

    csrpymostka,Wonderful one thank you so much !

  16. Nike Air Max avatar

    wdoegcoselo,Definitely believe that which you said. Your favourite justification appeared to be on the net the simplest thing to remember of.

  17. Cheap Yeezy Boost avatar

    vfaara,Wonderful one thank you so much !

  18. adidas originals avatar

    desntdoaw,If you are going for best contents like I do, just go to see this web page daily because it offers quality contents, thanks!

  19. Josie Bacon avatar

    Hi my friend! I wish to say that this post is amazing, great written and include almost all significant infos. I¡¦d like to look extra posts like this .

  20. Result nic.in avatar

    It’s actually a cool and useful piece of info. I am glad that you just shared this useful info with us. Please keep us up to date like this. Thank you for sharing.

  21. NFL Jerseys Cheap avatar

    pxndytkoro,This website truly has alll of the information and facts I wanted about this subject and didn?t know who to ask.

  22. Cheap Nike Shox Outlet avatar

    weeeclmrhkr,If you are going for best contents like I do, just go to see this web page daily because it offers quality contents, thanks!

  23. my singing monsters avatar

    You really should experience a contest personally of the highest quality blogs on the internet. Let me recommend this page!