Prosperity is both India's ambition and destiny: RBI dy governor Gupta

RBI Deputy Governor Poonam Gupta says India has entered a virtuous cycle of growth and stability, with many states likely to approach high-income levels by 2047

The central question is no longer whether India will prosper, but how quickly, how broadly, and how equitably that prosperity would be shared across its states and its people, Poonam Gupta, Deputy Governor, Reserve Bank of India (RBI), said on Monday at Columbia University. India has attained a virtuous cycle of accelerated growth and macroeconomic stability, she added. 

 

“Prosperity is both India’s ambition and its destiny,” she emphasised, adding that if growth trajectories of the past two decades are sustained, the average state per capita income could approach high-income thresholds by 2046-47.

 

Gupta highlighted that India’s economic growth had steadily accelerated from an average 5.7 per cent in 1980s to 5.8 per cent in the 1990s, rising further to 6.3 per cent in the 2000s, to 6.6 per cent in the 2010s, and reaching 7.7 per cent in the most recent four-year period. The acceleration is even more pronounced in per capita income. From about $274 in 1981 and $306 in 1991, per capita income had risen nearly tenfold to around $2,700 in 2024. 

 

 

“…While it took over two decades for per capita income to double initially, it has expanded by almost fivefold in the subsequent two decades, indicating a clear structural shift in growth momentum,” she said, adding that decline in population growth, too, has contributed to faster per capita income growth. 

 

India’s population growth, once significantly above the global average, has steadily moderated and has converged to global levels since around 2014, amplifying gains in per capita terms, she said. 

 

The International Monetary Fund projected India’s per capita income to increase to $2,818 in 2025, $3,051 in 2026 and $4,346 in 2030.

 

Gupta said India’s improving macroeconomic stability is reflected in sustainable and resilient outcomes across inflation, the current account balance, fiscal position, debt quality, and financial sector health, among others. She attributed this to reforms such as the Fiscal Responsibility and Budget Management framework, the Goods and Services Tax, and the inflation-targeting regime introduced in 2016.

 

The RBI Deputy Governor noted that growth had become broad-based across states, with every state recording a significant rise in per capita income over the past two decades. In the last two decades, average per capita incomes across states have increased nearly fivefold in US dollar terms and more than threefold in constant rupees, underscoring the strength and sustained pace of India’s long-term income gains. 

 

“Yet, the pace of income growth has varied across states. Some states have become five to 10 times more prosperous over the last two decades, while others have recorded more modest gains of around three times,” she said. Per capita income levels in more prosperous states have grown faster than in relatively less prosperous ones. But, the growth gap between richer and poorer states has narrowed in recent years, she added. 

 

“Overall, the outperformance of the richer states in the past has been driven not only by higher income growth but also by slower population growth. States above median income levels have both higher Gross State Domestic Product (GSDP) growth as well as slower population growth, resulting in a faster growth in per capita income,” she highlighted. 

 

However, she also highlighted that in recent periods (2011-12 to 2023-24), states with historically lower consumption levels are now recording faster consumption growth, a pattern confirmed by a statistically significant negative coefficient on initial consumption levels, marking a meaningful shift toward distributional convergence in living standards across Indian states.

 

“If the past rates of growth are maintained, many states will become or come close to becoming ‘rich’ by 2047 (as per the prevailing international thresholds of prosperity),” she stated. 

 

According to Gupta, sustaining or exceeding recent growth trajectories to reach an even higher level of prosperity by 2047 will require extending current growth frameworks at the subnational levels. 

 

For above-median states, she said, the focus ought to be on innovation and scale, planned urbanisation, attracting global and domestic talent, expanding market share both domestically and internationally, and actively taking part in shaping national frameworks on trade, FDI, and finance. 

 

For below-median states, she argued, priorities could include unlocking productivity in agriculture and reimagining the sector, building skills, integrating more in the national and international labour markets, complementing more advanced states, particularly in labour-intensive activities, emulating proven best practices nationally and internationally, while developing niche strengths, and strengthening fiscal capacity to support faster growth.