The International Monetary Fund (IMF) forecasts that India’s GDP will surpass the desired $5 trillion threshold in 2027 (India’s 2027u201328), surpassing the fourth- and third-largest economies in the worldu2014Germany and Japanu2014by reaching $5.15 trillion in current US currency.
Source: News Track Live, NewsTrack
What is causing India to go up in the GDP rankings? What does this indicate for the country and its citizens?
The Indian government declared its intention to reach a $5 trillion GDP by 2024u20132025 in 2019u20132020. That year, India’s GDP was $2.84 trillion, leaving a $2.16 trillion deficit that would need to be filled in five years. In 2022u20132023, India’s GDP totaled $3.39 trillion but only managed to pay for $0.55 trillion. We must imagine a distance of $1.69 trillion, which is three times the size of $0.55 trillion.
The $5 trillion GDP target has not been explicitly postponed by the government to a specific year. About 2026u20132027, the Chief Economic Adviser (CEA) has spoken. India is expected to surpass $5 trillion in 2027u20132028, according to the IMF.
There is a significant component, but we frequently overlook it when talking about a $5 trillion GDP sweepstakes. Since 2020, there has been a significant decline in the value of the US dollar. A US dollar will be much less valuable in 2023 than it was in 2019u201320, when India unveiled its $5 trillion GDP target.
In 2019, the US CPI was 117.2. With a stronger dollar depreciation of 4.67 percent annually during the course of these three years, it increased to 132.4 in 2022. Our $5 trillion aim for 2019u201320 will thus be $5.74 trillion in 2022u20132023. If we assume a 3% annual decline in the value of the dollar until 2027u20132028, India’s goal of a $5 trillion GDP would require a $6.65 trillion GDP in the same year.
Source: CNBC- TV 18
$6.65 trillion is considerably less than the IMF’s forecast of a $5.15 trillion GDP in 2027. Before we reach the $5 trillion GDP goal in 2019 prices, we will have to toil for a few more years. India’s per capita income climbed from $1,438 in 2013u201314 to $2,389 in 2022u201323, at a compound annual growth rate of 5.8%, when tiny island economies are excluded. In terms of per capita income, India placed 147th overall (out of 189) in 2013u201314. We rose to the 141st position during the previous nine years.
India has surpassed Nicaragua, Uzbekistan, Mauritania, Nigeria, Ghana, Kenya, and the Lao People’s Democratic Republic since 2014. However, Bangladesh, India’s ‘poor’ neighbour, has surpassed us. Brazil, Italy, France, and the UK, whose GDP India has surpassed, as well as Germany and Japan, which we will cross, nevertheless have much greater per capita incomes than we could ever hope to reach.
The result is obvious. India won’t flourish and advance until the typical India’s per capita income increases to upper middle-income levels, if not the high-income level, and not until its GDP rises to the third position.
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