‘India to be world’s third largest economy by 2027-28’

NEW YORK: Economist Arvind Panagariya has said India is on the cusp of returning to a high growth trajectory and voiced confidence that the country will become the world’s third-largest economy by 2027-28.

Currently, India is the fifth largest economy “so it’s another five years. We are already in (the year) 2023. So 2027-28, India should be the third-largest economy,” Panagariya, Columbia University Professor and former vice chairman of NITI Aayog, said here.

Panagariya said “My sense is that given where India stands currently, it should get back to 7% plus kind of growth rate.”

He added India is currently in a spot that it was in 2003 when the growth rate picked up to close to about 8 per cent and the country sustained that kind of rate for a few years.

Outlining his reasons for high growth ahead, he said several reforms have been implemented and weaknesses in the economy have been cleaned up during the COVID pandemic such as non-performing assets of banks and weak balance sheets of many of the big corporates.

Noting that balance sheets of banks and corporates are now pretty sound, he said “this is reflected in the investment proposals and investment commitments that are being made by many of the large corporates.”

“A government which realises its strengths and which is I think the reason you don’t see a whole lot of populism in the budget, even though this is the last full budget before parliamentary elections, tells you and makes me feel that India is on the cusp of returning to a high growth trajectory,” he said.

India heads into general elections in 2024.

Panagariya added that India will “certainly remain” the fastest-growing major economy for several years to come. He projected that India would maintain about a 7 per cent growth rate over these years and if the country takes measures to open up the economy further, particularly on the trade front with liberalisation requiring “a good bit of knocking down of the customs duties”, then “we could get to easily 8 per cent.”

He said the “rest of the strengths” for achieving this growth are present in the system. Some of the reforms that are ongoing need to be implemented, for instance, the labour law reform.

“If we can do that, I absolutely have no doubt that we would sustain 7% and could in principle, I think, touch 8 per cent.”

Referring to the announcements in the budget, he said his expectations were “fully met”.

On fiscal consolidation, the debt to GDP ratio had escalated to about 84 per cent as it stands currently after COVID because expenditures had to be raised at the time and revenues took a hit, which led to very large fiscal deficits, leading to the accumulation of debt, he said. “So we needed to get back to consolidation and the Finance Minister has made a good effort in that direction.”