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India Needs Average Annual 7.6% GDP Growth To Become Developed By 2047: RBI

The Reserve Bank of India, in its monthly bulletin, has outlined the significant growth targets India must achieve over the next 25 years to become a developed economy with high per capita income. Currently estimated at $2,500, India’s per capita income needs to surpass $21,664 by 2047, as per World Bank standards, to be classified as a high-income country. To achieve this ambitious goal, the country must maintain a compounded annual growth rate (CAGR) of 7.6% in real GDP during 2023-24 to 2047-48.

Targeting High Per Capita GDP

For India to become a high-income country by 2047-48, its per capita GDP in nominal terms would require a CAGR of 10.6% (9.1%). Notably, India’s historical best over a consecutive 25-year period was a CAGR of 8.1% during 1993-94 to 2017-18. Thus, to achieve the targeted 9.1% growth, India must surpass its previous record of economic growth.

Rebalancing Economic Structure

To sustain growth and achieve high per capita income, India needs to focus on rebalancing its economic structure, particularly by strengthening the industrial sector. The industrial sector, with its strong backward and forward linkages, plays a crucial role in providing employment opportunities and meeting the increasing demands of India’s growing population. The report suggests that India’s industrial sector should increase its share from the current 25.6% to 35% by 2047-48, with manufacturing occupying 25% of total value added. This would necessitate the industrial sector to grow at a nominal CAGR of 13.4%.

Enhancing Services Exports

India’s comparative advantage in services exports can be leveraged to sustain growth. If the country manages to sustain the growth in exports of goods and services (nominal) at 13.3%, as observed during the high growth phase of 1993-2017, their share in GDP is expected to increase from 22.8% in 2022-23 to 30.5% by 2047-48.

Sectoral Growth Targets

To achieve the desired economic transformation, the share of agriculture must decrease, while the share of services, as seen in advanced economies, should rise. Agriculture would have to grow at a CAGR of 4.9%, and the services sector at 13% over the next 25 years to achieve a sectoral share of 5% and 60%, respectively, by 2047-48.

Charts and Table:

Indicator Current Value (2022-23) Target Value (2047-48) Required CAGR
Real GDP Growth Rate (%) 7.6%
Per Capita GDP (USD) $2,500 $21,664 10.6% (nominal)
Industrial Sector Share (%) 25.6% 35% 13.4% (nominal)
Services Share in GDP (%) 22.8% 30.5% 13.3% (nominal)
Agriculture Sector Share (%) 5% 4.9% (nominal)
Services Sector Share (%) 60% 13% (nominal)

Challenges and Development Strategies

Realizing these ambitious growth targets requires a comprehensive development strategy focusing on sustained economic growth with structural change. It is crucial to ensure not only high per capita income but also all-round development, quality of growth, and sustainable use of natural resources. Rebalancing the economic structure, fostering industrial growth, and harnessing the potential of services exports will be key drivers in achieving India’s vision of becoming a developed economy by 2047-48. Emphasizing sustainable development and optimal resource management will play a pivotal role in accomplishing this long-term goal.

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