BT India@100: Arvind Panagariya says India can be a $50 trn economy by 2047. Here's how

Arvind Panagariya, Chairman of the 16th Finance Commission, believes that India has the potential to become a $50 trillion economy by 2047.

Reflecting on the country's economic performance over the last two decades, Panagariya stated, "India has grown in current dollars at 10 percent a year. If we stay on course, we could reach about $31-32 trillion by 2046-47, but I think we can do better."

In a session at BT India @ 100, he emphasized the importance of further liberalizing trade policies, suggesting that India's trade-to-GDP ratio could approach 50 percent if tariffs are lowered, and Free Trade Agreements (FTAs) with like-minded countries are pursued.

Panagariya also highlighted the need for structural reforms within the economy, particularly in sectors that are labor-intensive. He pointed out that capital is currently concentrated in industries that do not employ a large number of workers, a situation that needs to change. 

The industrial structure has to move a little bit more towards industries that employ more workers per unit of capital, he said, stressing on the importance of redistributing capital more evenly across sectors to boost employment and productivity.

Former Chief Economic Advisor Krishnamurthy V Subramanian had also shared an optimistic outlook for India's economic future, suggesting that the country could potentially reach a $55 trillion economy by 2047. He acknowledged that this goal is ambitious but achievable if the central and state governments implement policies that boost the nation's growth rate from its historical average of 7 percent to 8 percent. 

Subramanian cited the "rule of 72," explaining that with a 12 percent annual growth rate in dollar terms—comprising 8 percent GDP growth, 5 percent inflation, and a 1 percent rupee depreciation—India's GDP could double every six years, leading to "four doublings" from its current $3.25 trillion economy to $52 trillion by 2047.

Subramanian also emphasized the importance of financial inclusion and prudent use of government borrowings, advocating for investments in infrastructure, human capital, healthcare, and digital infrastructure rather than on subsidies or operational expenses. He drew parallels with Japan's economic expansion from $215 billion in 1970 to $5.1 trillion in 1995, underscoring the transformative power of strategic investments and high growth rates.