Krishnamurthy V. Subramanian, Managing Director of the International Monetary Fund (IMF)
India’s economy is estimated to grow to $55 trillion by 2047 if the country is able to register an average real growth rate of 8 percent in the coming years with average inflation remaining around 5 percent, Krishnamurthy V. Subramanian, managing director of the International Monetary Fund (IMF), said on Tuesday at a Business Today event.
He said 8 percent is ambitious but achievable, especially given the demographics and the type of policies that have been implemented in the past ten years, such as public digital infrastructure, innovation and entrepreneurship.
“If we look at entrepreneurship, World Bank data from 2004 to 2014 show that the creation of new businesses was 3.2% on average. Since 2014, this new rate is much higher. As a result, we have the third largest entrepreneurial ecosystem in the world, which will help productivity growth in the formal sector,” he said.
He also mentioned that formalisation of the economy will lead to higher productivity as two-thirds to three-quarters of the Indian economy is informal and informal sector firms are much less productive than those in the formal sector.
“Formalisation will be a key driver of productivity growth in India, something that is already happening through the vast public digital infrastructure,” he added.
Further, in response to a question on the World Bank’s claim that it will take India 75 years to reach a quarter of the US’s per capita income, the senior IMF official said the definition of middle income is quite broad and even if a nation increases its per capita GDP two, three or four times, it is still stuck in the middle-income trap.
He also stressed that growth in the manufacturing sector is essential for countries to escape the middle-income trap and highlighted the importance of having a sunset clause for subsidy schemes granted to industry.
First published: August 20, 2024 | 21:56 IS
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