India could become a $7 trillion economy by 2030, according to Prime Minister’s Economic Advisory Council (PMEAC) and NITI Aayog Member Bibek Debroy even as another council member said that growth had been 2% lower since 2011 due to the priority given to long-term structural changes.
“In the year 2030, India’s national income will be around $6.5-7 trillion,” Mr. Debroy said addressing the Skoch Summit on Thursday. “If exchange rate remains what it is today then, by 2035-40, India will be $10 trillion economy. And if the exchange rate appreciates, then India will be a $10 trillion economy before 2035.”
India needs to grow by 7% annually to become a $10 trillion economy by 2030, said Ashima Goyal, member of the PMEAC, adding this high growth was necessary to reduce poverty and create jobs.
“Since 2014, we have seen macroeconomic vulnerabilities have been reduced but there is some over-reaction (in terms of monetary and fiscal policy),” Ms. Goyal said. “If you focus only on structural reforms in the long run then in the short run you bear a large irreversible sacrifice. Growth has been 2% lower since 2011. This leads to a $400 per capita loss.”
“The delegation of a more conservative fiscal authority and less conservative monetary authority can change the prisoner’s dilemma into a co-ordination game,” she added.
Focus on infrastructure
Ms. Goyal said that the focus of government expenditure should be on non-tradable assets — such as infrastructure — because most of that demand will stay in the economy.
“What are the implications for the monetary policy? Tightening should be mild, communication should be very good to anchor wage price expectation,” Ms Goyal added. “The exchange rate should be competitive but there should not too much depreciation. If there is evidence of improvement in productivity and supply side cost improvements, monetary policy must be accommodative.”
Mr. Bibek Debroy said India would be a “remarkably different” country in the years to come as the size of its economy would increase the country’s role in global matters.
