India has the potential to become the second-largest economy by 2031 and the largest by 2060, Reserve Bank of India deputy governor Michael Debabrata Patra said on Friday.
Addressing officials of the Indian Administrative Service at the Lal Bahadur Shastri National Academy of Administration, Mussoorie, he said, “Given the innate strengths I described and the resolve to achieve its aspirational goals, it is possible to imagine India striking out into the next decade to become the second-largest economy in the world not by 2048, but by 2031, and the largest economy of the world by 2060.”
“It has been estimated that if India can grow at the rate of 9.6% per annum over the next 10 years, it will break free of the shackles of the lower middle income trap and become a developed economy,” Patra said.
He said current exchange rates determined in the market are subject to bouts of volatility. Hence, their application as denominators to the GDP measured in national currencies may not be appropriate for cross-country comparisons.
An alternative measure is the purchasing power parity (PPP). It is the price of an average basket of goods and services in each country. “With PPP, the comparison changes dramatically. In terms of PPP, India is the third-largest economy in the world. The $5-trillion milestone for 2027 translates to $16-trillion in PPP terms,” Patra said.
He said the principal task of the monetary policy is to become the anchor of the Indian economy. Short-run fluctuations of aggregate demand have to be managed proactively so that a broad alignment with the economy’s evolving productive capacity is ensured. “Price stability is the best contribution that the monetary policy can make to strengthen the foundations of the aspired trajectory of growth over the next few decades,” Patra said.
He emphasised that the formation of inflation in India needs to be navigated towards convergence with global inflation so that both the internal and external value of the rupee is preserved. This, he said, will prepare the ground for the internationalisation of the rupee and the emergence of India as an economic powerhouse.
