India To Become $10 Trillion Economy by 2026

[dray]

Exactly, although GOI needs a lot of support from RBI to do that. I would like to add some other points too :
1. Inflation needs to be checked, else higher interest rates will lead to less investment, resulting in less supply, more inflation, less GDP.
2. Whole TAX system needs to revamp. I appreciate how GOI putting high TAX rates on everything. Once VAT become national, increase VAT and relax the TAX Slab to 5 lacs.
3. More and more demand for swadeshi products. Patanjali is doing a masterpiece in here.

Yes, tax system needs to be revamped, and considering that less than 3% of the total population files income tax returns, and less than 1% of the population actually pays any income tax, we can even consider doing away with the income tax and focus on indirect taxes only.

I do not think we are going to see any currency appreciation soon. RBI keeps on buying dollars to increase its chest increasing demand for dollar arresting any significant appreciation in Rupee.

I am not saying soon, but with a steady growth and a controlled inflation for a period of 10 years, it will be actually difficult to keep it down even if we want to.

 

[Kal Muah]

Yup very crucial. People always ask me why not just keep inflation since it adds to the total growth.....not realising it is the single biggest factor that prompts currency depreciation (which subtracts from total growth). In fact inflation is really the negative shadow of the rupee that falls on world forex market.

Mismatch between money supply and demand is only really effectively controlled by ensuring the demand is always robust....depressing the demand side of money through increasing interest rates is quite a bad thing and is always a last resort because it has spill over effects. Interest rates should always reflect purely the ideal balance of long term savings rate for the economy and nothing else.

Sir, why dont you make a post on effect of Inflation on GDP, explaining both the fiscal policies. Most people dont get it well.

 

[dray]

Yup very crucial. People always ask me why not just keep inflation since it adds to the total growth.....not realising it is the single biggest factor that prompts currency depreciation (which subtracts from total growth). In fact inflation is really the negative shadow of the rupee that falls on world forex market.

Mismatch between money supply and demand is only really effectively controlled by ensuring the demand is always robust....depressing the demand side of money through increasing interest rates is quite a bad thing and is always a last resort because it has spill over effects. Interest rates should always reflect purely the ideal balance of long term savings rate for the economy and nothing else.

That's why I was opposed to RBI keeping the interest rates high for an unusually long period of time, that did more damage than good.

 

[Kal Muah]

Yes, tax system needs to be revamped, and considering that less than 3% of the total population files income tax returns, and less than 1% of the population actually pays any income tax, we can even consider doing away with the income tax and focus on indirect taxes only.

Exactly that is what I am saying rather than pulling out money from 1% of the population, relax the slab and pull the money from the remaining 99%. A mere 0.1% increase in Tax in foods and services, GOI can gain a lot from the 99% population. Arun Jaitely exactly did the same, puting swacch cess.. I love how policies are getting a new meaning in India

 

[Viper0011.]

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@GURU DUTT

My estimate, which has historically been pretty darn close, is that India will be around a $ 5-6 Trillion economy (+- 200 Billion or 2% MOE) by 2025 (which is serious growth). In 2014, India hit $ 2 Trillion. So a country over her 70 years of history and the size of the economy ($ 2+ trillion), can't just "Quadruple Up" in the next ten years. It doesn't work like that.

If you want to go towards $ 8,9,10 T mark, add more years, I'd imagine 2035 to 2038 is when it can happen.

 

[Nilgiri]

Considering that our rupee has heavily depreciated from it's 2006-07 level (from Rs.39 to Rs.67 a dollar approx!!), and it is going to appreciate eventually with a stronger economy.

So, we are likely to see an average of:
7.5% real growth + 5.5% inflation + 2% appreciation = 15 nominal growth
to
7.5% real growth + 5.5% inflation + 4% appreciation = 17 nominal growth

That will make us a little less or more than $10 trillion economy in 10 years, we need roughly 16% of average nominal growth to reach that level.

Yes appreciation will spring back robustly over time as long as RBI keeps its management shipshape....and India does not prompt fiat print/buy excessive reserves-based strategy that China employed in its ponzi investment/over-capacity schemes+reliance on trade. It operationalises nominal volumes in USD quite quickly, but I am pretty sure the other side of the coin is now going to hit China for the next 10 - 20 years or so....but thats another subject. Its a good learning experience for India....what did China do right and what did it do wrong.

Improvement of world economic climate will also help to spur this (appreciation) somewhat for India since demand for Indian goods will increase again.

How exactly the appreciation actually kicks in remains to be seen. Its like a rubber band that has been stretched and now has to come back, just like the interest rates in India. India fiscal deficit containment is a good first step....but we should be aiming for balanced budgets in the long term and reducing govt consumption as % of economy with time so there is less and less wasteful transfer from productive output to the hands of bureaucrats and the nepotism and monopolies they often create around them. Any stealing from the economy by force (which is what taxation is when you boil it down) has to be justified by having transparent, efficient and sustainable transfer rates in a bureaucracy. That is the mantra of "less government, more governance" that Modi is preaching....but it remains largely a conceptual exercise in my view so far. Someone has to really hack away at this stuff considerably at some time if India is to really accelerate sustainably and not bloat the bureaucracy from the economic growth. Lean muscle, not diabetes-inducing fat should be the name of the game.

 

[liall]

My estimate, which has historically been pretty darn close, is that India will be around a $ 5-6 Trillion economy (+- 200 Billion or 2% MOE) by 2025 (which is serious growth). In 2014, India hit $ 2 Trillion. So a country over her 70 years of history and the size of the economy ($ 2+ trillion), can't just "Quadruple Up" in the next ten years. It doesn't work like that.

If you want to go towards $ 8,9,10 T mark, add more years, I'd imagine 2035 to 2038 is when it can happen.

I am still happy with 5 trillion $ + economy by 2025 which is certainly going to happen. It will put us out of lower middle income nation to a middle income nation i.e No longer poor. India no longer a poor country will be of huge significance to the world plus hopefully INDIA = POOR jokes/comments on every thing India does like space missions etc. will stop

 

[Kal Muah]

My estimate, which has historically been pretty darn close, is that India will be around a $ 5-6 Trillion economy (+- 200 Billion or 2% MOE) by 2025 (which is serious growth). In 2014, India hit $ 2 Trillion. So a country over her 70 years of history and the size of the economy ($ 2+ trillion), can't just "Quadruple Up" in the next ten years. It doesn't work like that.

If you want to go towards $ 8,9,10 T mark, add more years, I'd imagine 2035 to 2038 is when it can happen.

With utmost respect I dont agree with you sir. Growth doesn't always increase like that. If india can hold up its growth rate in a constant rate, where the global economy is going to be stagnant, Indian economy growth will not act linear, instead it will grow exponentially.

 

[dray]

My estimate, which has historically been pretty darn close, is that India will be around a $ 5-6 Trillion economy (+- 200 Billion or 2% MOE) by 2025 (which is serious growth). In 2014, India hit $ 2 Trillion. So a country over her 70 years of history and the size of the economy ($ 2+ trillion), can't just "Quadruple Up" in the next ten years. It doesn't work like that.

If you want to go towards $ 8,9,10 T mark, add more years, I'd imagine 2035 to 2038 is when it can happen.

We have already done that, during 2000-2010 India's nominal GDP has grown by close to 4 times (3.62 times exactly) with an average annual real growth rate of just 7.22%.

 

[Nilgiri]

That's why I was opposed to RBI keeping the interest rates high for an unusually long period of time, that did more damage than good.

It was the only option available given the absolute crap done by UPA from govt strategy side. Now Rajan is testing the waters slowly and is cautious because of exactly what he inherited.

That is pretty important since its end user physical consumption in goods and services (which GDP PPP per capita attempts to estimate) that matters much more than exchange rate value in some foreign currency not printed by India (like Nominal USD*).....and PPP gets wrecked by inflation badly. Adding refinement to the PPP guard dog tactics of old RBI philosophy is being handled quite well by Rajan....I hope he continues, I find him refreshingly different and common sense much like Suresh Prabhu.

* Nominal measure also has its importance, but it is secondary to PPP. Nominal is like electrification (adds more avenues of capacity and velocity options w.r.t global market especially) and PPP is the fundamental track that is laid first....you can run desi/jugaad WDM2 on it just fine till you wait for electrification and then you can choose more stuff to run depending on what you want to haul.

Sir, why dont you make a post on effect of Inflation on GDP, explaining both the fiscal policies. Most people dont get it well.

Sure I'll do this tomorrow or some time down the line soon.

 

[Sky Scraper]

6 to 7 trillion is possible

 

[BetterPakistan]

I don't see it happening till 2026. Its exaggerated, with such trends continue India can become $10 trillion after 2030 not before it.

IMF reported India GDP $2090.706 billion in 2015 and to take it to $10 trillion till 2026 India requires 17% growth per year and if India controls inflation to 6-7% than about 10-11% gdp growth which is quite difficult to continue for a decade for such a big economy and India is yet to touch double digit GDP growth so its completely exaggerated.

 

[randomradio]

6 to 7 trillion is possible

I don't see it happening till 2026. Its exaggerated, with such trends continue India can become $10 trillion after 2030 not before it.

IMF reported India GDP $2090.706 billion in 2015 and to take it to $10 trillion till 2026 India requires 17% growth per year and if India controls inflation to 6-7% than about 10-11% gdp growth which is quite difficult to continue for a decade for such a big economy and India is yet to touch double digit GDP growth so its completely exaggerated.

Achieving those growth figures is not difficult, especially if the govt doesn't change for another term and agriculture growth picks up.

The main issue is currency depreciation. Since 2012 the rupee has deteriorated rapidly in just 4 years. It's good for some and bad for some, but such a large depreciation isn't good for a resources import dependent economy like India, especially when imports of resources is as big as our govt spending. A country like China importing 5 mbpd of oil is nothing compared to India importing 3.5 mbpd.

Depending on currency fluctuation, we can remain a $2-3T economy even in 2026 or even surpass $10T. Of course, it doesn't mean India has not grown, it's only an exchange rate, and most of the economy is not dependent on currency fluctuations. India has a net influx of money, so if a company plans on investing $1B in India, and before they do it the currency depreciates, then they have more rupees when they convert, so they can put more money into the economy.

Without the fall in currency from 2012, India would have been a $4T economy today. But if the currency didn't depreciate, then CAD would have been higher today which is not good considering the economic environment. If UPA had made good policies and done proper reforms, then India would have had robust growth and the currency would not have depreciated so much. No point crying over spilt milk, but history could repeat.

 

[Viper0011.]

We have already done that, during 2000-2010 India's nominal GDP has grown by close to 4 times (3.62 times exactly) with an average annual real growth rate of just 7.22%.

It was a one time deal due to the constant FDI, jobs and industry throughput India had been receiving for years. Plus you guys started to list salaries and operational expenses for offshore Indian employees as "FDI" and other items as such. Which on paper showed the GDP doubling. Nations with 1 billion population don't just double over night without doubling up the entire population's human growth in all aspects, as the growth in GDP (Gross Domestic Product) is spread across the entire nation work and growth output. So if you see different markets, somehow, without having associated human improvement the GDP doubled up . You should try to fool someone who's dumb as shiit, not here. Cooking books and meals doesn't mean the "projected growth" was real . But despite that, India is growing rapidly and she will get to a $ 5 or 6 trillion economy around 2026-2028!

With utmost respect I dont agree with you sir. Growth doesn't always increase like that.

If india can hold up its growth rate in a constant rate, where the global economy is going to be stagnant, Indian economy growth will not act linear, instead it will grow exponentially.

You don't have to agree with me. People high on blind patriotism are way the heck away from reality. You can answer my post in 2026 and the results will be a shocker for you

 

[illusion8]

@temporary12345

that was a nice one, personally, I don't qualify for any welfare nor any pensions..but there is a sizeable population that do.

There are hundreds of welfare schemes in operation - rozgaar, aahaar, free schooling free housing, free medical, pensions etc..Tamil Nadu even conducts free marriages. .whether you like it or not..India is turning into a welfare state.