On The Way To World No 3

Data suggests India will become the third largest economy by end of 2027-28, if not sooner

- Arvind Panagariya

Prospects of recession in the US and Europe have led some to speculate that the Indian economy may suffer a similar fate. Suggestions of an outright recession are, of course, silly since they entail a decline in the level of economic activity lasting for several months, something unlikely under any plausible scenario.

But even the predictions of tepid growth are without a sound foundation. Based on the available data, a good case can be made that growth would touch the 8% mark in the current fiscal year and sustain at a 7-8% rate in the medium term. By my calculation, the country would become the third largest in the world by the end of 2027-28 if not sooner.

Consider first the current fiscal year, 2022-23.

In the first quarter, the economy has already recorded a growth rate of 13.5%. To touch the 8% mark for the full year, the sum of the growth rates in the remaining three quarters must reach 18.5 percentage points. There are two reasons why this is a wholly achievable target.

● GDP in the second, third and fourth quarters of 2021-22 exceeded its value in the corresponding quarter of 2019-20 by 1.9%, 6.9% and 9.8%, respectively. At GDP bases implied by these growth rates, growth rates such as 8%, 5.5% and 4.5% (or another similar set of rates summing to 18.5 percentage points) in the remaining quarters are not just feasible but quite plausible.