India could be $55 trillion economy by 2047 with 8% growth: IMF official

Krishnamurthy V Subramanian says India can achieve the feat if the country can keep the inflation below 5%

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Indian economy is slated to grow to $55 trillion by 2047, if the country is able to register an average real growth rate of 8 per cent in the coming years with average inflation remaining around 5 per cent, said Krishnamurthy V Subramanian, executive director, International Monetary Fund (IMF), on Tuesday at a Business Today event.

He said that 8 per cent is ambitious but achievable, especially given the demography and the kind of policies that have been implemented over the past ten years like the public digital infrastructure, innovation and entrepreneurship.

“If you take entrepreneurship, World Bank data from 2004 to 2014 shows that new firm creation was 3.2 per cent on average. From 2014 onwards, this new rate is orders of magnitude higher. As a result, you have the third-largest entrepreneurial ecosystem in the world, which will help with the productivity growth in the formal sector,” he said.

Besides, he also mentioned that formalisation of the economy will lead to higher productivity as between two-thirds to three-quarters of Indian economy is informal, and informal sector firms are far less productive than formal sector companies.

“Formalisation is going to be a key driver for productivity growth in India, which is already happening through the (vast) public digital infrastructure,” he added.

Further, in response to a query on the World Bank's claim that India will take 75 years to reach one-fourth of the US’s per capita income, the top IMF official said that the definition of middle income is quite wide and even if a nation increases its GDP per capita by two, three, or four times, it remains trapped in the middle-income trap.

He also emphasised on manufacturing growth being critical to countries to escape middle-income trap and highlighted the importance of having a sunset clause for subsidy schemes provided to the industry.