India's Economy May Touch USD 55 Trillion By 2047 If Growth Rate Remains At 12%: IMF Chief Economist

Executive director at the International Monetary Fund (IMF) Krishnamurthy Subramanian on Wednesday said that the size of the Indian economy has the potential to touch USD 55 trillion by 2047 if the growth rate in dollar terms remains at 12 percent.

Speaking at a CII event here, Subramanian, the former chief economic advisor to the government from 2018 to 2021, said that inflation targetting since 2016 had helped the country average out the rate of price rise to five percent.

Before 2016, the average rate of inflation was 7.5 percent, he said. With a real growth of eight percent, the nominal growth is expected to be 13 percent with a five percent inflation rate, the economist said.

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"With the rate of depreciation of the Indian currency to be less than one percent vis-a-vis the dollar in the long run, the fundamentals of the economy will start to show up," he said.

In this context, Subramanian said that the real growth rate of India will be 12 percent in dollar terms. According to him, then the size of the economy will double every six years.

"With the present size of the economy at USD 3.8 trillion, the possible size in 2047 could touch USD 55 trillion", he said.

Subramanian said that India can grow at eight percent in real terms. According to him, in advanced economies, investments have been saturated where productivity improvement will be the only source of growth.

The other cause for the country could grow at eight percent is due to a greater formalisation of the economy. At present, one-half to two-thirds of the Indian economy is still in the informal sector, he said.

"Higher formalization of the economy will lead to higher productivity. But there is still scope for raising the productivity of the Indian formal sector as compared to global peers," Subramanian said.

Entrepreneurship, innovation, and private credit creation are the other three key pillars that will help the economy to grow at eight percent in real terms, he said. Subramanian, who was a key architect of the economy during the COVID years of 2020-2021, said the country's response to the pandemic was different from the rest of the world.

"Since India's inflation was less than the historical average of the advanced economies, the Indian government then was able to chart out economic policies with conviction which had delivered positive results," he said.

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