In an interactive session during the launch of his book ‘India @100’ at Indian School of Business (ISB) here, Subramanian said becoming a USD 55 trillion economy by 2074 may appear audacious, but it is achievable. He also said India’s private credit to GDP ratio was 58 per cent in 2020, six decades behind the advanced economies which are now at 200 per cent, though there is phenomenal work being done in terms of financial inclusion through schemes like ‘Pradhan Mantri Jan-Dhan Yojana’.
“So in other words…while this of course appears to be audacious, it is the power of compounding that makes it happen. As long as we are able to register 8% growth, we can actually become a $55 trillion economy,” the former chief economic advisor said when asked why he thinks India has the potential to be a USD 55 trillion economy by 2047.
Asserting that his assumptions are based on a “rule of 72” which when applied to the 12 per cent dollar rate of growth (8 % GDP growth, 5% inflation-1% Rupee depreciation against dollar), GDP doubles every six years, he explained that over the 24-year period from 2023 , the economy which is now at USD 3.25 trillion will have “four doublings” resulting in USD 52 trillion by 2047.
Presenting Japan as an example, Subramanian said its economy grew from USD 215 billion in 1970 to USD 5.1 trillion in 1995, almost a 25x increase in a 25 year period while the GDP per capita grew from USD 2100 to USD 44,000. The IMF official, underscoring the importance of utilisation of government borrowings to create assets, said if they are used to fund subsidies or revenue expenditures, it would not add to the economy.
In addition to physical infrastructure, India needs to invest in elevating human capital, healthcare and also build digital capital, among others, which are the responsibility of the sovereign, he added.