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Big and small matters
Last week, I discussed the topic of India’s economic future in a speech at the National Council of Applied Economic Research and the Consumer Unity and Trust Association in New Delhi.
I illustrated the challenges of becoming a high-income country by comparing India to Greece, the poorest country rated as a “developed country” by the International Monetary Fund.
In 2023, India’s GDP per capita will be just under a quarter of Greece’s, measured in purchasing power parity (PPP). If Greece’s GDP per capita grows by just 0.6% (which is the trend from 1990 to 2029, according to IMF projections) and India’s GDP per capita grows by 4.8% (which is the trend from 1990 to 2029), then by 2047 India’s GDP per capita will be just 60% of Greece’s.
If its GDP per capita is to reach Greece’s level by 2047, it would have to grow by 7.5% per year, which would be no less than China’s growth rate from 1990 to 2012, when it achieved an astonishing 9% annual growth rate.
The overall size of the economy is quite different. The United Nations predicts that by 2050, India’s population will reach 1.67 billion, compared with China’s 1.32 billion and the United States’ 380 million. With a population more than four times that of China, it won’t be hard for India to catch up with the United States in terms of economic output.
Indeed, if India’s GDP grew by just 5% per year by 2047 (well below its trend annual growth rate of 6.3% from 1990 to 2029) and U.S. GDP grew by 2.3% (on a like-for-like basis, its trend annual growth rate from 1990 to 2029), then India’s economy (in terms of purchasing power parity) would be on par with that of the United States.
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