- Thursday, February 27, 2025
However, they said that while the South Asian country is on track to become the third-largest economy, it still has work left to have a higher per capita income.
By: Shubham Ghosh
INDIA’S rise as an economy in the era of prime minister Narendra Modi is something that experts intensely debate and speculation is rife over the South Asian nation’s further economic elevation globally.
Last week, prime minister Narendra Modi remarked that India will become the third-largest economy in the world by 2027-28, which will be during his third term in office (he will have to win next year’s national election though) and financial analysts have been found to be busy expressing their opinions on the country’s journey ahead.
Nilesh Shah of Kotak Asset Management and Indranil Sengupta of CLSA recently spoke with Moneycontrol over India’s potential to become the third-largest economy and both agreed that the target set by Modi is ’eminently achievable’. The publication also said that several reports, including those put out by India’s biggest public sector bank — State Bank of India, along with Shah and Sengupta, suggested that India could well become the third-biggest economy by 2027-28.
“At our current growth rate, we will reach the target by 2028-29. If we accelerate our growth rate to 7-8 percent, it can happen early,” Shah was quoted as saying by Moneycontrol.
However, becoming the third-largest economy will not necessarily mean that India’s per capita income will also soar. While India is the fifth-largest economy at the moment, its per capita income is Rs 172,000 (£1,638), nearly on par with its smaller neighbour Bangladesh, which is the 36th largest economy.
“For us, this is a journey. For 140 crore people to become the third-largest is not the endpoint. In per capita income/GDP terms, we remain well below our peers. For us, this is a stepping stone to growth. During the (major part) of human history, India was among the top two economies in the world. We need to go back to that level. We have a long way to go from a per capita/GDP point of view,” Shah told Moneycontrol.
The SBI said in its report that India requires to add $1.81 trillion (£1.41 trillion) to its GDP, which is more than the current size of Australia’s economy, between 2022-27.
Sengupta opined that if India continues to do business as usual, it can hit $44 trillion (£34.5 trillion) in the next three decades and that would take it at par with today’s smaller eastern European economies in terms of income.
“If we are able to (bring in) reforms, then we will achieve efficiencies of scale, and we can touch $120-130 trillion (£94-£102 trillion) in the next 30 years. When you are 140 crore (1,400 million) people, you will become the third-largest economy in overall terms; the challenge is to grow more. If we bring in reforms, then we can treble the number from $40 trillion (£31.3 trillion) to $120 trillion (£94 trillion). India’s problem is execution,” he was quoted as saying by Moneycontrol.
