Krishnamurthy V Subramanian, executive director of the International Monetary Fund (IMF), stated at a Business Today event on Tuesday that if the Indian economy can maintain an average real growth rate of 8% and an average inflation rate of around 5% in the coming years, it is projected to reach USD 55 trillion by 2047.

He described the 8% growth rate as an ambitious but feasible target, pointing to the favourable demographics and the implementation of policies like public digital infrastructure, innovation, and entrepreneurship over the last decade.

Citing World Bank data from 2004 to 2014, he noted that the average rate of new firm creation for entrepreneurship during that period was 3.2% but has significantly increased since 2014. This growth has positioned India as the world’s third-largest entrepreneurial ecosystem and is expected to fuel productivity growth in the formal sector.

Subramanian also highlighted the importance of formalising the economy to enhance productivity, noting that the informal sector, which constitutes two-thirds to three-quarters of the Indian economy, is significantly less productive than formal sector enterprises. 

He pointed out that the ongoing formalisation of the economy, facilitated by the extensive public digital infrastructure, is a critical factor driving productivity growth in India.

In response to a query about the World Bank’s projection that India would take 75 years to reach one-fourth of the US’s per capita income, the IMF official explained that the concept of middle income has a broad definition and even significant increases in GDP per capita could still leave a nation in the middle-income trap.

Regarding agriculture, Kharif crops, such as paddy and maise, were sown across a larger area in the week ending August 9, 2024, compared to the corresponding period last year, which could be seen as a positive development for policymakers and central bankers striving to control food inflation.

He also stressed the significance of manufacturing growth for countries to break free from the middle-income trap. He then underlined the importance of establishing a sunset clause for industry subsidy schemes.

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