CashNews.co
India has the potential to become a $50 trillion economy by 2047 if the country makes the most of its young demography, favourable geopolitical conditions and improves per capita income in the coming decades, said Arvind Panagariya, the chairman of the Sixteenth Finance Commission, on Tuesday.
India has grown about 10% annually in current dollar terms over the past years and maintaining the trajectory would make the South Asian country a $32 trillion economy by 2047, he said at Business Today‘s India@100 Economy Summit 2023 in New Delhi.
“But I believe we can aim higher,” Panagariya added.
He said India’s per capita income is low, and there’s a lot of room to catch up with the advanced economies. At the same time, other factors like geopolitics and demography are favourable for pushing the nation towards becoming a bigger economy.
India’s per capita income, which stood at ₹2.12 lakh in 2023-24, is projected to reach ₹14.9 lakh by 2047, according to a presentation by the chief economic advisor V. Anantha Nageswaran at a press conference after the tabling of the Economic Survey for 2023-24 in July.
Panagariya also said liberalizing the economy further can help the country realize its trade potential. “We are an open economy… But, in terms of the trade policy, there is a lot of scope to liberalize further. Many tariffs are high, which need to be brought down.”
“As a free trade economist, I don’t have a problem if we go to zero. But that’s not practical… But you know, bring tariffs down and do free trade agreements (FTAs), especially with like-minded countries,” he added.
Panagariya said the West’s China Plus One policy, a business strategy adopted by Western countries to encourage companies to diversify their manufacturing and supply chains by investing in countries other than China, puts India in a great position to push its growth rate further.
The policy’s goal is to reduce reliance on China and mitigate risks associated with geopolitical tensions and supply-chain disruptions.
Moreover, he said India should make way for more labour-intensive industries to tap the potential of its workforce. “There’s a lot of hope that the new labour codes enacted in 2019-20 will now be implemented, which will go a long way in clearing the obstacles to the emergence and expansion of these labour-intensive sectors. We also need quite a bit of work in land, as urban land in India is expensive.”
He said India will need more reforms to escape middle-income trap. The South Asian country will need to remain an open market economy that competes with the best in the world.
He added that states must step up reforms to help pull up the country’s economy in the coming years.
The middle-income trap is when a country reaches a middle level of income per capita but doesn’t develop further and can’t become a high-income country.