India expected to become $7 trillion economy in seven years: CEA

Chief Economic Advisor V. Anantha Nageswaran. File.
| Photo Credit: Kamal Narang

Chief Economic Advisor V. Anantha Nageswaran said on Monday that the Indian economy will be $3 trillion by the end of the current 2022-23 fiscal and is expected to be $7 trillion in the next seven years.

The government had previously said India would become a $5 trillion economy by 2025.

Speaking at a session organised by MCCI, Nageswaran said virtually that the calendar year 2023 began in the context of the continuing conflict between Russia and Ukraine, which will “create geo-political and geo-economic uncertainties”.

The other major aspect is the opening up of China after two years of the pandemic and its impact on the world economy, particularly on retreating oil and commodity prices and also on the growth of the advanced economies of the US and Europe.

“In these contexts, the Indian economy will be of the size of $3 trillion at the end of March 2023 and $7 trillion in the next seven years, which is not impossible,” Nageswaran said.

The CEA also said the most important issue is that the U.S. is expected to lower its interest rates in 2024 or 2025, which will have an impact on the Indian rupee.

The National Statistical Office has predicted that the economic growth of the country in 2022-23 will be 7% in real terms and 15.4% in nominal ones, the economist said.

Nageswaran also mentioned that the realistic medium-term growth is 6.5% in contrast to 8 or 9%, which was witnessed during the 2003-2008 period.

“During the 2003-2008 period, there was a global boom in terms of capital flows into India. The Chinese economy and commodity economies grew strongly. Now, the situation is different due to global monetary tightening, which will have a lag effect on all the economies,” he said.

The CEA also said India had undertaken a lot of structural reforms, including the implementation of the Goods and Services Tax, and Insolvency and Bankruptcy Code, since 2016.

Jan Dhan accounts have facilitated the seamless transfer of government benefits, he said.

The economist also said improvements in digital infrastructure “has the potential to contribute 0.2 to 0.5% of the country’s GDP”.

The corporate sector is now deleveraged and willing to borrow, and private capital formation is taking place at the moment, while banks are having low NPAs and are also keen to lend.