Change course

The economy's capacity is constrained, Budget must unveil consumption booster and more

India's economic growth capacity seems to have settled around 6-6.5%, a far cry from over the 8% annual expansion required for it to meet the $35 trillion economy target by 2047, the 100th year of Independence. To become a "developed nation" with per capita income (PCI) above $13,000 by 2047, the PCI must grow at a daunting rate of over 11% a year. To be sure, between the second quarters of FY20 and FY25, the gross domestic product (GDP) grew by an annual average of just 4.87%, and between the first quarters of those years, at an even lower rate of 4.59%. The 8.2% GDP growth reported in FY24 was more a statistical bump caused by the pandemic abyss than being reflective of an economic resurgence. Nothing less than a policy overhaul will suffice for the economy to regain its lost growth capacity and avoid a middle-income trap that looks increasingly real.