India can achieve 10% growth rate in next decade: RBI’s Patra
It is possible to imagine India striking out into the next decade with a growth rate of 10 per cent, according to MD Patra, Deputy Governor, RBI.
This growth rate is possible given the country’s innate strengths and the energies and transformation that are driving it to overcome its challenges and achieve its aspirational goals.
“If this is achieved, India will become the second largest economy (as per OECD’s December 2023 update, India will overtake the US by 2045 in PPP terms to become the world’s secondlargest economy) in the world not by 2045, but by 2032 and the largest economy by 2050,” Patra said at the Nomura’s 40th Central Bankers Seminar at Kyoto, Japan.
The Deputy Governor emphasised that the Indian economy is at a sweet spot in its evolution.
“Real GDP is growing at the fastest pace among major economies. Inflation is approaching its target albeit unevenly. The external balance sheet is stronger than ever before, underpinned by ebullient capital inflows, a modest current account deficit and large foreign exchange reserves. Fiscal consolidation is into its third consecutive year after the pandemic,” he said.
‘NEW CYCLE’
Patra observed that the corporate sector has deleveraged and is poised to launch a new cycle of capital investment. “The financial sector is sounder and more resilient, as it prepares for intermediating the resource requirements of a rising growth trajectory over the next few decades. “Reflecting these developments, financial markets are ignited with robust optimism even as investors are already positioning themselves to buy into the unfolding India narrative,” he said.
GROWTH TREND
The Deputy Governor underscored that India’s growth trend is on the cusp of a postpandemic upshift, with early signs of it rising above 7 per cent recorded during the 2000s before Covid19 struck.
“While private consumption typically accounts for about 60 per cent of India’s GDP, it is investment and exports that provide the turning points. In the period 202124, the export lever has been muted by global headwinds, but public expenditure on infrastructure is taking over as the locomotive of the stepup in the growth trend. Recent surveys indicate that private investment is getting crowded in,” he said.
Patra observed that country has emerged from the pandemic scarred but resilient and poised to make a tryst with its developmental ambitions by riding the thermals that these opportunities are generating. However, takeoff will have to contend with the headwinds posed by several challenges. “Reaping the demographic dividend hinges on expanding the contribution of the workforce to GDP growth.
“India’s per capita investment in infrastructure at US $90.6 in constant 2015 dollars in 2020 needs to be scaled up by lifting infrastructure investment growth from around 3.5 per cent to at least 6 per cent to achieve worldclass standards,” the Deputy Governor said.