NITI Aayog's dream of a $10-trillion Indian economy by 2032 pared to half

An HSBC report estimates that the size of China's economy by 2030 will be $20 trillion bigger than India's, and Bangladesh will record the highest GDP growth rate

In 2016, NITI Aayog Chairman Amitabh Kant projected that India would become a $10-trillion economy by 2032. It seems this optimistic prediction has been cut into half: In a report titled ‘The World in 2030’, HSBC has stated that the country’s economy would grow to $5.9 trillion by 2030 from an estimated $2.8 trillion at present.

The report, released in September 2018, states: “One of the most striking rises among the rankings will be by India, which is set to become the world’s third-largest economy in just over a decade, up from seventh today – leapfrogging the second- and third-largest developed economies of Germany and Japan.”

While Kant’s projections were based on the assumption that India would grow at an average 10 per cent to become a $10-trillion economy by 2032, the HSBC report estimates an average 6.2 per cent growth rate would make India a $5.9-trillion economy by 2030.

The HSBC projections might seem impressive, but they still need to be taken with a pinch of salt — for three reasons. Firstly, the Indian policy makers who are comparing India’s economic progress with China’s may be in for disappointment. Despite India clocking a higher economic growth rate than China, the gap between the size of the two economies will further increase by 2030. At present, China’s economy is almost $11 trillion bigger than India’s. Though the HSBC report projects China’s growth rate up to 2030 at 5.2 per cent, much lower than India’s 6.2 per cent, that would make the size of China’s economy $20 trillion bigger than India’s. Even as India more than doubles the size of its economy, the gap between the two will only grow wider. China will overtake the US as the world’s largest economy, and India will jump four notches to become the world’s third-largest.

Secondly, India will be outperformed by neighbour Bangladesh, which is expected to be the top-performing economy in terms of growth rate by 2030. The HSBC report predicts Bangladesh to grow at an average 7.1 per cent rate during the period. While India’s economy will just about double, Bangladesh’s will grow 133 per cent to be worth $700 billion. Since the present size of Bangladesh’s economy is much smaller than India’s, it will record a much larger jump globally in terms of economic size. The report projects Bangladesh to jump 16 places to become the world 26th-largest economy. In effect, Bangladesh will be bigger than some other rich and middle-income nations like the United Arab Emirates (UAE), Israel, Malaysia and South Africa by 2030.

Thirdly, despite decent economic growth, India’s citizens will not get rich at the same pace as those of some neighbouring and other lower-middle-income countries. The gap between per-capita income of Indians and some of the neighbouring countries will increase over the next decade.

At present, an Indian on an average earns almost $310 more than a Bangladeshi. But by 2030, he would likely earn only around $220 more. Contrarily, Indians as of 2018 earn $2,000 less than Indonesians. But by 2030, this gap would likely widen to almost $2,400. What’s even worse is the growing disparity between Indians and the Chinese. At present, an average Chinese citizen earns almost $7,900 more than an Indian. But by 2030, the per-capita income gap between the two nations could widen to $13,000.

The only source of optimism on this front seems to be Pakistan. At present, Indians earn almost $600 more than Pakistanis. And by 2030, this gap is expected to more than double to $1,400. But then, Pakistan is not one of the countries Amitabh Kant and his men would be proud to compare India’s “$10-trillion” growth story with.