India could be third largest economy in 2026: Ex Niti Aayog VC Panagariya

With a slew of reforms in place, India, with a Gross Domestic Product (GDP) of $5 trillion, could emerge as the world’s third-largest economy in 2026, according to Professor Arvind Panagariya.

Today, India is the world’s fifth-largest economy, preceded, in ascending order, by Germany, Japan, China, and the United States of America (USA). In 2022, the GDP in India, Germany, and Japan stood at $3.4 trillion, $4.1 trillion, and $4.2 trillion, respectively, Panagariya said while delivering the Eighteenth C.D. Deshmukh Memorial Lecture on December 15, 2023, in Mumbai.

The Reserve Bank of India hosted the lecture by Panagariya, who is a professor of economics at Columbia University. The theme of his lecture was “India at 125: Reclaiming the Lost Glory and Returning the Global Economy to the Old Normal”.

Assume that in the next four or five years, India will maintain an average growth rate of 10.22 per cent in current dollars. This growth rate was achieved during the last two decades. At this rate, India’s GDP in current dollars will reach $5 trillion in 2026 and $5.5 trillion in 2027. This means there are good prospects that India will become the world’s third-largest economy by the end of 2026, sooner than nearly all current predictions, he said.

The first of these decades was rocked by the global financial crisis, and the second by the pandemic. There have been many reforms in the last decade. The problems afflicting China have led global investors to turn to India as an important destination.

To realise its full potential, India must take the necessary steps to help its economic units grow larger. Small habitations, small farms, and small enterprises are intimately linked. Reforms that will help enterprises in industry and services grow larger will create job opportunities for the masses, which will, in turn, pave the way for workers to migrate from rural to urban areas, he added.