G20 Sherpa and Former Niti Aayog CEO Amitabh Kant said India’s highlighted remarkable economic progress and stressed the need for sustained high growth rates of 9 to 10 per cent for the next 30 years.
Speaking at CII Southern Region Annual Regional Meeting 2024 in Bengaluru, Kant described world’s economic trajectory to be in a “once in a generation economic shift,” and pointed out India’s resilience amid global economic challenges and its potential to become the world’s third-largest economy by 2027.
“India needs to accelerate at a high pace of growth and make the country grow at 9 to 10 per cent for a three-decade period. For that, a lot of change needs to happen at the state-level, lot of efforts are already happening at the central level.” - Amitabh Kant, G20 Sherpa and Former Niti Aayog CEO
He outlined a trajectory for India's economic growth based on varying growth rates. He posited that if India sustains a 6 per cent growth rate, the economy would grow to USD 15 trillion, concurrently lifting the per capita income from approximately USD 3,000 to about USD 8,875. Should the growth rate reach 8 per cent, Kant projected the GDP soaring close to USD 23 trillion, helping the per capita income to approximately USD 15,000, thereby resulting in greater prosperity for all citizens of the country.
However, Kant suggested that the country must aim for a 10 per cent growth rate, which would mean that India’s GDP would surpass USD 35 trillion, elevating the per capita income to around USD 23,000 to USD 24,000.
“Ambition must be very high, to make it 10 per cent growth over a three-decade period and that would mean that India can’t grow only on the back of services sector. The country requires to grow on the back of India that is firing on all cylinders, which includes manufacturing, smart urbanisation and agriculture,” he said.
In January, the IMF upgraded India’s economic growth rate outlook to 6.5 per cent for FY25 and FY26, up 20 basis point compared to the organisation’s October numbers.
“According to my estimate, India can be a USD 10 trillion economy by 2032-33, there is a 90 per cent chance of this. So, the next 7-8 years, we will add USD 6.5 trillion to the GDP,” said T V Mohandas Pai, Chairman at Aarin Capital Partners and former CFO at Infosys, speaking at the event.
‘Need To Increase India’s Global Trade Share’
Kant stressed the crucial role of exports in India’s growth trajectory and highlighted the need to increase India’s share in global trade from the current 2.5 per cent to close to 5 per cent.
“For this to happen, I think we need to get the size and scale of manufacturing, which is what we have attempted through the Production Linked Incentive (PLI) scheme. This will support Indian companies to grow bigger and create global champions,” he said.
The G20 Sherpa felt that creating such a system will enable backward integration of creating tier-2, tier-3 and tier-4 manufacturers. However, he also acknowledged the challenge of achieving this amidst growing protectionism worldwide, with countries like the United States, Europe and Japan adopting increasingly protectionist measures.
“No country in the world after World War-II has grown without becoming a major exporting nation.” - Amitabh Kant
‘Revival of Private CapEx Required’
Discussing the importance of private sector investment, Kant said, “There is a need for revival of private corporate investment.” He highlighted the need for a conducive environment for private investment, citing high capacity utilisation and robust balance sheets, and called for increased lending to the private sector to drive economic growth.
Kant stressed upon India’s potential for growth, driven by significant increases in government capital expenditure post-Covid. He pointed towards the necessity of raising the gross investment rate from its current 31 per cent to approximately 35 per cent within the next two years, to inject further acceleration to 39-40 per cent.
“Today, if you look at India’s GDP, the gross investment rate is about 31 per cent of GDP. Now, 31 per cent of GDP is okay for 6.57 per cent rate of growth. If you want to have an accelerated growth of close to 9 per cent, it’s very important that the gross investment rate is raised from 31 per cent to close to 35 per cent in the next two years, and is then accelerated further to 39 to 40 per cent.”
Kant also spoke on the critical role of private corporate investment, noting that India’s private debt to GDP ratio stands at around 56-57 per cent, lower than the United States’ 130 per cent and China’s 180 per cent. He underlined the need for sustainable lending to the private sector and suggested that India's favourable economic indicators, such as high capacity utilisation and strong bank and corporate balance sheets, position it for growth through private sector capital expenditure.
The former Niti Aayog CEO predicted that once this is initiated, the trend will create a virtuous cycle of economic expansion, further solidifying India’s growth trajectory.
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