New Delhi: India has the potential to sustain high economic growth in the coming years and become a developed economy by 2047 if it introduces new regulatory, legal, infrastructural and educational reforms, economist John Lipsky told Mint.
Lipsky, a senior fellow at the Foreign Policy Institute of the Johns Hopkins University School of Advanced International Studies (SAIS) said the reforms initiated by India in the past few years have helped it remain the fastest growing among the G20 economies.
“The reforms so far, imperfect as they are, incomplete as they are, have produced results. I think there’s clarity that if you want to sustain these rapid rates of growth, new reforms are necessary,” Lipsky said.
The path is clear for India to achieve high economic growth consistently, he said.
“It’s not hard to imagine what needs to be done. The extra benefit to India is the young population and the growing workforce, which makes sustaining growth much easier compared to other economies where the workforce is shrinking,” Lipsky said.
“What is also encouraging is that you can see areas that could be improved, that the authorities recognize this. Though this is not necessarily going to be easy or simple, it would improve the efficiency of the economy,” 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%.
India recorded growth rates of 8.2%, 8.1%, 8.6% and 7.8% in the four quarters of FY24, culminating in an overall 8.2% growth for the fiscal year, thus emerging as the fastest growing major global economy.
Speaking on the ongoing geopolitical tensions in West Asia, Lipsky, who served as the first deputy managing director of the IMF between 2006 and 2011, said the impact of the Israel-Hamas war has had limited economic impact globally, despite oil prices seeing fluctuations.
“Given the destruction and suffering, one would hope that this could be brought to an end. The risk quite clearly is if the conflict spreads in intensity and geographically, and the major obvious impact would be on energy prices. But it’s very hard to foresee because so much of this is unknown,” he said.
“But I don’t think it is going to change the global (economic) outlook,” he added.
Lipsky said the rise in protectionism used by countries, especially in trade and commerce is fragmenting the global economy.
Referring to the recent tariffs announced by the European Union on Chinese electric vehicles, and US presidential candidate Donald Trump’s promise to enact punitive tariffs on China if voted as the president, Lipsky said major economies should cooperate to arrive at a solution instead of fighting each other.
“The international system was designed to be rule-based, multilateral and non-discriminatory. That approach has produced for 80 years the best economic performance in the history of the world,” he said.
“And we’re turning our backs on it because of geopolitical conflict. What we should be looking for is cooperation because we know that cooperative solutions produce wins.”
Lipsky said during his time at the IMF, countries forged partnerships with others and worked together, while not forgetting their interests.
“There was a strong sense…as the old Benjamin Franklin saying goes, if we don’t hang together, we will surely hang separately. So there was strong action taken in a cooperative environment that frankly I had hoped would be a paradigm for future relations. However, things have gone in a different direction,” he said.
On global trade, Lipsky said the general trading system has become more complex, less efficient and potentially more fragile.
“There’s no question that it is a risk that either geopolitical frictions or a protectionist sentiment could produce effects that wouldn’t just redirect trade flows, but restrict trade flows, which would be serious,” he added.