Target $10 Trillion

Only the United States and China have $10 trillion-plus economies. What it will take for India to get there.

- Samar Srivastava

In February, while presenting the Union Budget, a brief reference to the future size of the Indian economy by interim finance minister Piyush Goyal got people to sit up, take notice, and either nod appreciatively or scoff at his claim. “We are poised to become a $5 trillion economy in the next five years and aspire to become a $10 trillion economy in the next eight years thereafter,” said Goyal. $10 trillion is the equivalent of `705,00,00,000 lakh crore at current exchange rates.

Expectedly, most disagreements were with the ambitious timeline Goyal had proposed—getting there would require 11.36 percent growth a year for the next 13 years–but this marked an important shift. It was the first time the government seemed to have a number in mind. Later that month, Prime Minister Narendra Modi followed it up by saying that the Indian economy would reach $10 trillion. He did not specify a timeline.

Given India’s current growth trajectory, the significant catchup growth left, and the country’s favourable demographics, getting to $10 trillion is a fair bet to take. Last year, Forbes India had explained to readers (tinyurl.com/y6m23zbj) why, in the absence of a rising savings rate, slow growth in productivity and lack of reform in factor markets—land, labour and capital—it is unlikely India will reach a 9 percent-plus growth trajectory in the next few years.

Manish Chokhani, director at brokerage Enam Holdings, cautions, “The past is replete with examples of countries that have failed to live up to their potential, including India.” Yet, there are slivers of hope. A recent study by McKinsey Global Institute titled Outperformers: High-growth emerging economies and the companies that propel them, which looked at 71 economies, classified India as a recent outperformer—or an economy that has grown at 5 percent or more for over 20 years.