SIZE MATTERS
I addressed the topic of India’s economic future in lectures last week at the National Council of Applied Economic Research and the Consumer Unity and Trust Society in New Delhi.
I illustrated the challenge of becoming a high-income country by comparing India with the poorest country ranked as “advanced” by the IMF, Greece.
In 2023, India’s GDP per head at purchasing power parity (PPP) was just under a quarter of that of Greece. If Greek GDP per head grows at a mere 0.6 per cent (its 1990-2029 trend, with IMF forecasts) and India’s grows at 4.8 per cent (its 1990-2029 trend), India’s GDP per head would only be 60 per cent of Greece’s in 2047.
If its GDP per head were to match that of Greece by 2047, the rate of growth in GDP per head would need to rise to 7.5 per cent a year. That rate of growth would not be far below that of China from 1990 to 2012, when it achieved the astounding annual rate of 9 per cent.
The picture of aggregate size is rather different. United Nations’ forecasts indicate that by 2050, India’s population will be 1.67 billion, against 1.32 billion in China and 380 million in the United States. With more than four times the population, it will not be hard for India to match total US economic output.
Indeed, if India’s GDP were to grow at only 5 per cent a year to 2047 (well below its 1990-2029 trend annual rate of 6.3 per cent), and US GDP were to grow at 2.3 per cent (its 1990-2029 trend rate, on a similar basis), India’s economy (at PPP) would equal that of the US.
