Datanomics: India needs to innovate, cut debt to become developed by 2047

India’s gross domestic product (GDP) growth accelerated to 6.2 per cent in the third quarter of FY25, up from 5.6 per cent in the previous quarter. However, India needs to grow at an annual rate of 7.8 per cent from 2024-47 to achieve the vision of ‘Viksit Bharat’ and become a high-income economy, according to the World Bank.

 

India’s GDP grew at an annual average of 6.7 per cent from 2000-19, faster than other large and emerging markets, said the bank in its report — Becoming a high-income economy in a generation.

 

From 2020-21 to 2024-25 (2020-2024 in case of the rest of the world), India's economic growth slowed to 5.4 per cent but was higher than any other major country including China.

 

Currently, India is a low-middle income country with a per capita GNI of $2,540 in 2023. At the current growth rate, the report says, India is poised to become an upper-middle income country by 2032. UMICs possess a per capita GNI between $4,516 and $14,005, according to the World Bank’s Atlas Method. 

 

The World Bank report also presented a comparison of India and successful UMICs transitioning to high-income countries on various macroeconomic parameters. India’s trade openness as a per cent of GDP was 46.3 per cent in 2023 (lower than 56 per cent in 2012).

 

India lags both successful and trapped UMICs in innovation and research, with only 13 patent applications per million population in India vis-à-vis 59 per million population for successful UMICs.

 

Agriculture and allied activities comprise 16.8 per cent of India’s gross value added, which is significantly higher to such a share of 3 per cent in case of successful UMICs. Agriculture in India still accounted for over 45 per cent of total employment in 2023-24.

 

However, India’s macroeconomic fundamentals are stronger than successful and trapped UMICs. The volatility in India’s real GDP growth (measured by standard deviation) is 1.5, lower than those of successful UMICs. India’s forex import cover of 8 months is also better than that of UMICs.  

 

The same, however, is not true of debt. Although India’s external debt as a per cent of GDP (20.1 per cent) is much lower than successful UMICs’ external debt of 45.1 per cent of GDP, its gross government debt as a per cent of GDP is much higher than that faced by successful UMICs.