GDP to $55 Trillion by 2047: ED, IMF
STORIES, ANALYSES, EXPERT VIEWS
Krishnamurthy Subramanian, executive director at the International Monetary Fund and former chief economic advisor (CEA), told ET in an interview that India could be a $55 trillion economy by the 100th year of independence if the twin effects of inflation targeting and fiscal prudence are factored in.
Edited excerpts
Assessment of the Indian budget: “If you look at the fiscal deficit and inflation amidst a scenario where there have been twin crises - Covid followed by the Ukraine war - I think the macro fundamentals have looked very good when put against the previous global financial crisis…..India has done very well with inflation at 90% of the historical average when advanced economies are anywhere between 2.5 to 4 times their historical average.”
Fiscal deficit sovereign ratings: “India's government policies are not or should not be aimed at such a flawed measure like sovereign credit ratings. The government is following fiscal discipline because it is the right thing to do. Given how poorly the sovereign credit ratings are seen...they do not reflect our fundamentals….”
The government is talking of taking the deficit number to below 4.5% next year. How feasible is that?
Fiscal deficit below 4.5% next year: “…..The actual fiscal deficit number will be lower than the budgeted number because growth will be higher and that is exactly how it transpired. The nominal growth assumed in the budget estimates is 10.5%. I think it will be higher than that. As a result, the fiscal deficit number will be lower than the budgeted number. The budget number is 4.9% of GDP. I think it'll be 4.8% or 4.7%…..”
$55 trillion forecast: “When I make a prediction, I do not make the prediction out of thin air. There is a rule of 72. It essentially is a close approximation for the number of years it takes for money to double. If your money is growing at 7%, then your money will double in ten years. If it is growing at 10%, your money will double in seven years…
Now, in 2023, India's GDP was $3.28 trillion….The first doubling is from $3.25 trillion to $6.5 trillion. The second doubling is from $6.5 trillion to $13 trillion. The third doubling is from $13 trillion to $26 trillion. This is an explanation of the numbers using the Ernst and Young prediction. They are assuming the rate of depreciation of the rupee vis-a-vis the dollar to be what has been historically the case. Eventually, over a 20-25-year period, fundamentals have to show up in the currency.”
Three most important policy decisions that need to be taken: “First, I would say credit creation….Second is formalisation. And third, innovation and entrepreneurship.”
