New Delhi: India, the world's fastest-growing major economy, has the potential to sustain annual growth of 6-7% but must overcome several key challenges to reach this target, top industry experts said on Friday at the Mint India@2047 summit.
Speaking at a panel on '$30 billion economy by 2047: What to do now to make this possible,' Dharmakirti Joshi, chief economist, CrisilL said a growth accounting exercise conducted by his company expects the Indian economy to grow at 6.7% annually for the next seven to eight years.
"If that happens, our size will increase from $3.6 trillion economy to about $7 trillion, making us the third largest in the world," he said.
However, Joshi warned that while the Indian economy is currently the fifth largest in the world, its per capita income is one of the lowest, ranking 143 globally.
"There is a lot of ground to cover. The per capita income is expected to rise, as the GDP is growing faster than the population (growth)," Joshi said.
"We believe it will become about $4,500 (from about $2,730), which is the beginning of the upper-middle-class category, and the consumption begins to become more dense by that time," he added.
The Reserve Bank of India (RBI) estimates India's gross domestic product (GDP) growth at 7.2% for FY25, aligning closely with the International Monetary Fund’s (IMF) projection of 7%.
To be sure, India’s GDP growth moderated to 6.7% annually in the April-June quarter, down from 7.8% in the previous quarter, largely due to a decline in government capital expenditure amid the general elections and a drop in urban consumer confidence.
Previously, the Indian economy recorded growth rates of 8.2%, 8.1%, 8.6%, and 7.8% across the four quarters of FY24, culminating in an overall 8.2% growth for the fiscal year.
"When we are talking about growth sustaining at 7.5%, you have to be careful about what’s happening to this incremental capital-output ratio and what can you do about it,” said Pronab Sen, former chief statistician of India.
"Today we have a situation where the difference between a 90-year loan and a 10-year loan is 70 basis points, which is just about the same as in the US. Then we were surprised as to why companies that are absolutely rationale and sensible are becoming more and more capital intensive,” he added.
Speaking on the challenges India needs to address on its journey to becoming a developed economy by 2047, Naina Lal Kidwai, chairperson, Rothschild India, said while jobs, labour productivity and its contribution to the economy are important drivers for growth, water and sanitation issues will also play a key role in the country's development roadmap.
"About 85% of our water goes to agriculture. Are we giving enough attention to what we grow and how we grow it and the answer is no," Kidwai said. "If we solve this, will will achieve a terrific agenda for growth,” she added.
Vishal Sharma, executive director and chief executive officer at Godrej Industries (Chemicals), pointed out that most developed countries don't spend as much as 85% of their water resources on agriculture, with bigger industries focusing on water recycling and preservation.
“Big industries are driving a lot of efficiency and recycling on water but the minute you get to lower and small-scale industries, I think the awareness itself is low,” Sharma said. “I believe water needs to be priced much higher. This is a very unpopular statement but the fact is that water is considered free in our country,” he added.
Jagbir Singh Sidhu, chief commercial officer, Diageo India said there is a huge potential for exporting alcohol from India through the sector is marred with the need for a large number approvals which are often a
"We all know the Indian single malts that are making a mark for themselves globally. Unfortunately, while we export the product, we also export the duties,” Sidhu said.
"To run a factory (alcohol) we need at least 10,000 approvals per year. Ease of doing business is something that will really help our manufacturing sector,” he added.
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