’India will remain lower middle income till 2047...’: Raghuram Rajan weighs in on country’s growth potential

Former RBI Governor Raghuram Rajan said if India does not grow fast economically, it will grow older demographically before it gets richer. He also hinted towards the burden of an ageing population to deal with at that point.

Livemint
Updated17 Dec 2023
Raghuram Rajan, former governor of the Reserve Bank of India
Raghuram Rajan, former governor of the Reserve Bank of India(Photo: Mint)

Raghuram Rajan, former Governor of the Reserve Bank of India (RBI), said India would reach the end of the demographic dividend by 2047 (Amrit Kaal) and still be classified as a lower middle-income country if the growth rate remains at 6% annually without any population growth.

Speaking at an event in Hyderabad, the former RBI governor said that if the nation does not grow fast economically, it will grow older demographically before it gets richer. The economist hinted towards the burden of an ageing population to deal with at that point.

Also Read | Raghuram Rajan says Gurgaon and Noida function as first-world economies. Top 4 thoughts on India's economic landscape

"If you do the math, at 6 per cent a year, you double every 12 years, and therefore in 24 years, we'll be four times our per capita income. Today, the per capita income in India, as you know, is just a little below $2,500 per person…multiply by four, we get $10,000 per person…So if you do the math, at our current rate of growth, you know, strong as it is highest in the G20, we don't get rich but we stay lower-middle income till 2047," Raghuram Rajan was quoted by PTI as saying.

Rajan said some southern states are growing with regards to population at below reproduction rate, in other words, the fertility rate has fallen below reproduction rate thus slowing the growth.

Also Read | US visa: 5 big changes in rules that happened in 2023

"In other words, we will start the process of aging at some point around that time, which leads to the alarming question if we don't grow faster, we will grow old before we grow rich, which means we all have all the burdens of an aging population to deal with also at that point," he said.

The current pace of growth is not enough to employ all those who are entering the labour force and insufficient to make the country get richer, before it gets older, the former RBI chief said.

RBI raises India's 2023-24 GDP growth by 50bps to 7%

Early this month, the Reserve Bank, while maintaining the status quo in key policy rate, raised India's GDP growth forecast for financial year 2023-24 by 50 basis points to 7%. In its October meeting, the RBI forecast 2023-24 growth at 6.5%.

This upward revision comes on the heels of India reporting more-than-expected July-September quarter growth.

The Indian economy grew 7.6% during the July-September quarter of the current financial year 2023-24, remaining the fastest-growing major economy. India's GDP growth for the April-June quarter grew 7.8% .

(With inputs from agencies)

 

 

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