Executive Director of the International Monetary Fund (IMF), Krishnamurthy Subramanian, emphasized the need for global investments in India in three key areas: manufacturing, climate change, and financing. Subramanian was speaking during a book launch on December 5, 2024, hosted by the United States India Strategic Partnership Forum in Washington, D.C.
Subramanian expressed hope that his message would reach “some investors,” highlighting manufacturing as a critical area for growth, citing the example of Apple’s operations in India. This move, he noted, has created excellent job opportunities and boosted India’s iPhone exports.
Subramanian, who previously served as the Chief Economic Advisor to the Government of India, recently authored “India @ 100,” in which he projects that India will become a $55 trillion economy by 2047. However, this forecast contrasts with predictions from financial firms like Ernst & Young and Goldman Sachs.
In his book, Subramanian writes, “For India to realize the opportunity that only comes once in a few centuries, every Indian must internalize the immortal works of Swami Vivekananda: ‘Arise, awake and stop not till the goal is reached.’ Only then can India capitalize on the unprecedented opportunity to emerge as a $55 trillion economic powerhouse in its centenary year.”
Explaining the difference in his assessment, Subramanian pointed out that these firms based their projections solely on the historical depreciation rate of the rupee against the dollar. He argued that their analysis overlooked important macroeconomic factors that are crucial to India’s future growth.
India is being positioned as a leading economic destination for the next two decades, with Subramanian highlighting several key factors that set it apart from other countries. He pointed out that India’s growing economy, which is currently the fifth largest and likely to become the third soon, offers significant returns for investors in comparison to other global markets.
He emphasized the labor advantages that new businesses entering India will enjoy, which are not easily found in other regions. These advantages, coupled with a rapidly expanding economy, are expected to result in significant returns over the next 25 years. In fact, investors looking at India may not just double or triple their money, but potentially see returns that are 15 to 20 times higher than in other countries.
Subramanian further noted that with India’s nominal GDP growing at a rate of 12 per cent, salary increases are projected to be around 17 to 18 per cent annually. This means salaries could double every five years. Over the next 30 years, salaries in India could increase 100 times, far surpassing the 7 to 8 times projected for the United States, he added.
Moreover, he highlighted the higher return on investment in India, with an expected annual return of 7 per cent, compared to the 4 per cent return in the U.S. He underscored that the opportunities for retail investors are “phenomenal,” if they chose to invest in deposits or the equity markets.
India’s GDP in 2023 was $2.28 trillion, which he rounded to $3.25 trillion. He believes that if India can maintain a 12 per cent annual growth in nominal dollars every six years over the next 24 years, it can easily reach the target of a $55 trillion economy.
He argued that this goal is “plausible,” and outlined a four-pillar framework to support such growth: strong macroeconomic policies, inclusive development, ethical wealth creation, and private sector investment.
Using the examples of Japan and China’s remarkable GDP growth, Subramanian emphasized his message to both India watchers and Indians: if other countries can achieve such growth, India can too. He noted that there is “too much cynicism,” around this idea and shared his core belief that “a cynic looks for a challenge in every opportunity. A visionary looks for an opportunity in every challenge.”
He stressed that India’s growth trajectory in the coming decades will differ from that of other advanced economies, as it will be driven by “catch-up growth.” He highlighted that India’s economy remains “informal,” in contrast to the more “formal,” economies of developed nations.
This distinction will push India to focus on investments aimed at boosting productivity. He also underscored the importance of investing in key areas such as education, healthcare, sanitation, and digital infrastructure to enhance investment rates and stimulate productivity growth.
He further discussed India’s progress on the Global Innovation Index, noting that the country, which ranked 85th in 2015, now stands at 39th in 2024. However, he believes that, given India’s position as the world’s fifth-largest economy, it should ideally be ranked within the top 20.
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