India needs faster growth for a decade to meet goals: RBI Dy Guv Patra

It's possible for India's per capita income to climb to levels required to be considered a high income or developed country, Patra said

By Anup Roy

India will need rapid economic growth for a decade in order to achieve Prime Minister Narendra Modi’s goals of becoming a developed country by 2047, a top central bank official said.

It’s possible for India’s per capita income to climb to levels required to be considered a high income or developed country, Deputy Governor Michael Patra said at an event organized by the lobby group, the Confederation of Indian Industry, in Mumbai on Tuesday. But, for that, “a burst of speed is required for just about a decade,” he said. “Thereafter, sheer momentum will propel India forward even at lower rates of growth.”

Economists have said Modi’s goal is over-ambitious as it would require gross domestic product to increase more than sixfold to about $23 billion, and for growth to reach at least 8 per cent a year. 

Patra said the goal was achievable, though, provided that the country builds “world class physical infrastructure” and creates a “conducive environment” for innovation. 

India has an infrastructure spending gap of at least 4 per cent of GDP, Patra said. By 2030, infrastructure investment will need to rise to $1.7 trillion, or Rs 143 trillion, with about $0.4 trillion in green investments, he said.

“Going forward, the private sector will move to the center stage for infrastructure spending, especially in energy and transportation,” he said. 

The country will also need nearly $2 trillion of financing for its micro, small and medium enterprises, for which there should be additional sources of financing than banks. The country will need to rapidly skill up its young workforce, for which it will need to spend 2-3 trillion rupees a year for the next six years. 

The household sector will probably be the chief source of funding for all these requirements, Patra said. That would need a turnaround in savings, though, which have almost halved as a share of the GDP during the pandemic. 

“Going forward, boosted by rising incomes, households will likely build back their financial assets,” and reach their previous peak of 15 per cent of GDP seen during early 2000s, the deputy governor said. 

He estimated that total savings in the economy, which includes households, businesses and the government, could climb to 32 per cent-36 per cent of GDP, from nearly 30 per cent now.