India's Potential: A $26 Trillion Economy by 2047

 The sources detail the comprehensive Economic Projections and Milestones (EY) for India, culminating in the vision of an economy valued at US$26 trillion by 2047-48 (in market exchange rate terms). This period, termed the ‘Amrit Kaal’ by Prime Minister Narendra Modi, represents India’s opportunity to become a “developed” economy by the 100th anniversary of its independence in 2047.

Key Economic Projections (FY2047-48)

The core projections from EY, particularly those based on the most preferred scenario (S3), define the scale of India’s economic potential:

• GDP Target: India’s GDP is projected to reach US$26 trillion in market exchange rate terms by 2047-48.
• Per Capita Income: By 2047-48, India's per capita income is expected to exceed US$15,000, which would place it among the ranks of developed economies. Under scenario S3, the per capita GDP is projected to reach US$15,602 by FY2048. This level is roughly six times its current level.
• Alternative Scenarios: Even when considering alternative simulations (S1 and S2), the estimates for the size of the Indian economy in FY2048 lie in the narrow range of US$23.9 trillion to US$25.8 trillion.

Critical Milestones and Thresholds

The path to a $26 trillion economy involves crossing several critical intermediate financial thresholds, based on the preferred S3 scenario (measured in market exchange rate terms):

Threshold (in US$ Trillion)	Projected Fiscal Year (FY)
$5.4 Trillion	FY2028
$10.1 Trillion	FY2036
$20.3 Trillion	FY2045
$25.8 Trillion	FY2048

India is also projected to cross the threshold of US$13,000 in market exchange rate terms in FY2045. Furthermore, in Purchasing Power Parity (PPP) terms, India is projected to cross the PPP$10 trillion threshold in the current year (FY2023) and PPP$20 trillion by FY2034.

The sources also project that India is likely to overtake Germany and Japan to become the third largest economy after China and the US by 2030.

Projected Growth Rates

For these projections to materialize, India is expected to maintain high average growth rates:

1. Medium Term (FY2023 to FY2028): India is expected to remain the fastest growing large economy. The IMF projects India's real GDP growth to average 6.5% per annum during this period, which is more than double the projected average global growth rate of 3.2%.
2. Long Term (FY2023 to FY2048): In the preferred scenario (S3), India's real GDP is projected to grow in the range of 6.0% to 6.4% over the entire forecast period, averaging 6.2%.
3. Nominal Growth (US$ terms): Projected GDP in US$t terms shows an average annual growth of close to 8.4% over the forecast period (FY2023 to FY2048).

It is noted that the overall growth profile is expected to moderate over time due to factors such as declining marginal productivity of capital and the falling contribution of technological progress.

Context: Methodology and Drivers of Growth

The economic projections are based on a methodology that uses guidance from global studies by the IMF (for medium-term projections) and the OECD (for long-term forecasts), modified to suit India’s growth profile.

The projections rely heavily on the Simulation 3 (S3) scenario, which is considered the most preferred because it assumes positive changes in key economic parameters:

1. Increased Savings Rate: The nominal savings rate is augmented to increase from 30.5% in the base run (S1) to 32.4% by FY2061 in S2 and S3.
2. Technological Progress: S3 reflects the impact of increased technological progress, reducing the ratio of Net Fixed Capital Formation to GDP relative to GDP growth.

These projections are underpinned by eight growth drivers anticipated during the Amrit Kaal:

• World’s Information Technology and Services Hub: India's strong services exports (growing at 14% over the last two decades) and the opportunity to become the "office of the world" are key.
• Digitalization: A Force Multiplier: India's Digital Public Infrastructure (India Stack), the robust digital payment ecosystem (UPI), and platforms like ONDC and OCEN will formalize the economy, reduce the cost of doing business, and democratize credit.
• Filling the Credit Gap: India has a low private debt to GDP ratio (55%) compared to global peers, providing a large "runway for increasing leverage to drive growth". Development of the corporate bond market and accelerated credit growth will drive consumption and investments.
• Thriving Entrepreneurship: India is the third-largest ecosystem for start-ups globally, backed by robust Private Equity/Venture Capital (PE/VC) funding.
• Reaping the Demographic Dividend: India is projected to become the most populous country in 2023, providing the largest contributor to the global workforce (25% of incremental global workforce over the next decade). This young population (median age 28.4 years) reinforces competitive advantage and unleashes consumption power.
• Making Domestic Manufacturing Competitive: Initiatives like ‘Atmanirbhar Bharat’ and the Production Linked Incentives (PLI) scheme are aimed at increasing the share of manufacturing in GDP and establishing India as a global manufacturing hub in emerging sectors like EVs and semiconductors.
• Building the Infrastructure of the Future: Accelerated investments, exemplified by the National Infrastructure Pipeline (NIP) and the ‘Gati Shakti’ initiative, aim to reduce the cost of logistics from 14-18% of GDP to the global best practice of 8% by 2030.
• Transition to Sustainable Energy: Government targets include being net zero by 2070 and achieving 50% of power generation capacity from non-fossil fuel sources by 2030, spurring significant investments and positioning India to become a low-cost producer and potential exporter of green hydrogen.

Ultimately, the goal is not just to exceed these growth projections, but to provide "inclusive and equitable opportunities and access to education, skills and better health, covering all sections of the population".

The vision for India to realize the potential of a US$26 trillion economy by 2047-48 (in market exchange rate terms) is predicated on the successful realization of eight key economic forces, termed the 8 Growth Drivers of Amrit Kaal and Beyond. The sources emphasize that India’s current strengths, combined with a future-oriented strategy and effective execution, will sustain the necessary growth rate (averaging about 6% per annum) over the coming decades.

These drivers are crucial for achieving the "Amrit Kaal" vision set by Prime Minister Narendra Modi, which aims for India to become a "developed" economy by the 100th anniversary of its independence.

Here is a discussion of the eight growth drivers:

1. World’s Information Technology and Services Hub

India is strongly positioned as a global technology and services hub, driven by its robust exports in this sector.

• Growth and Scale: India’s services exports have grown at a Compound Annual Growth Rate (CAGR) of 14% over the last two decades. Information Technology (IT) and Business Process Outsourcing (BPO) services account for over 60% of these exports, standing at US$157 billion in 2021-22.
• Talent and Innovation: This success, initially driven by cost arbitrage, is now centered on high-quality talent and leading-edge innovation. India has over 1,5Growth and Scale: India’s services exports have grown at a Compound Annual Growth Rate (CAGR) of 14% over the last two decades. Information Technology (IT) and Business Process Outsourcing (BPO) services account for over 60% of these exports, standing at US$157 billion in 2021-22.
• Talent and Innovation: This success, initially driven by cost arbitrage, is now centered on high-quality talent and leading-edge innovation. India has over 1,500 Global Capability Centers (GCCs), representing 45% of global GCCs outside their home countries.
• Future Role: India has the opportunity to become the “office of the world” for corporations adopting technology globally. Indian and global IT services companies will leverage India for higher value, skill-intensive services such as consulting, AI/analytics, full-stack digital engineering, and product development for Industry 4.0. India is also poised to become a global capital for technology talent and potentially a platform and product powerhouse.

2. Digitalization: A Force Multiplier

Digitalization acts as a force multiplier, improving governance, increasing economic efficiency, and addressing historical disparities, especially in rural areas.

• India Stack: The Government of India’s focus on building Digital Public Infrastructure (DPI), known as the India Stack, is described as a "global benchmark". This open architecture facilitates high-volume, low-cost transactions and provides critical building blocks like digital identity (Aadhaar), payments (UPI), and data empowerment.
• Economic Impact: The core digital economy grew 2.4 times faster (15.6%) than the overall Indian economy between 2014 and 2019. This infrastructure fosters financial inclusion, formalizes the economy, reduces the cost of doing business, and supports a rapidly growing start-up ecosystem.
• New Platforms: Upcoming platforms like the Open Credit Enablement Network (OCEN) aim to democratize credit at scale by enabling cash-flow based lending, while the Open Network of Digital Commerce (ONDC) will onboard micro, small, and medium enterprises (MSMEs) onto e-commerce platforms.

3. Filling the Credit Gap to Fuel Growth

India has a low private debt to GDP ratio (55%) compared to global peers, providing a significant "runway for increasing leverage to drive growth".

• Improved Banking Health: The banking sector has seen a substantial decline in Gross Non-Performing Assets (NPAs), reaching a seven-year low of 5% as of September 2022. Banks are now well-capitalized and capable of absorbing shocks.
• Credit Demand: The MSME sector, which contributes 30% to GDP, faces a credit shortfall estimated at US$250–300 billion. Accelerated credit growth is expected to drive consumption (through personal credit) and capital investments (in manufacturing and infrastructure).
• Digitalization in Credit: Digital infrastructure allows for improved credit assessment and risk underwriting, enabling cash flow-based lending to individuals and MSMEs, replacing older collateral-based systems.
• Corporate Bond Market: Development of the corporate bond market is crucial for long-term financing, especially for infrastructure projects. India's corporate bond market (16% of GDP) is sub-optimally utilized compared to Asian peers.

4. Thriving Entrepreneurship Spurred by Private Capital

India's strong entrepreneurial culture has been amplified by digitalization and supportive policies.

• Start-up Ecosystem: India has emerged as the third-largest ecosystem for start-ups globally. The number of new unicorns has grown exponentially, with a 66% year-on-year growth rate over the four years preceding FY 2017-18. As of August 2022, India had 107 unicorns with a total valuation of US$341 billion.
• PE/VC Investment: This boom is supported by robust availability of Private Equity/Venture Capital (PE/VC) funding, which hit record levels of US$82 billion in FY 21-22. Successful exits (US$42.5 billion in FY21-22) demonstrate strong investor confidence.
• Differential Growth: New-age companies, backed by capital and digitalization, are expected to be instrumental in delivering differential growth to the Indian economy.

5. Reaping the Demographic Dividend

India is poised to become the most populous country in 2023, possessing the world’s largest and youngest workforce.

• Working Age Population: Approximately 25% of the incremental global workforce over the next decade will come from India, with the working-age population expected to exceed 1 billion by 2030. India's median age is 28.4 years, reinforcing its competitive advantage.
• Talent Pool: India has the largest pool of English-speaking Science, Technology, Engineering, and Mathematics (STEM) graduates globally, with an annual addition of 2.14 million. Furthermore, the large pool of healthcare professionals (including 1.3 million doctors) can be leveraged to address global talent shortages.
• Consumption Boom: The demographic advantage will unleash an unprecedented consumer boom. The projected six-fold growth in per capita income by 2047 is expected to drive high consumption growth rates. This young population is already shifting towards credit-driven consumption, evidenced by the doubling of outstanding personal loans by scheduled commercial banks from 2016-17 to 2021-22.

6. Making Domestic Manufacturing Competitive

Global supply chain disruptions have created an opportunity for India to establish itself as a manufacturing hub, supported by initiatives like ‘Atmanirbhar Bharat’.

• PLI Scheme: The Production Linked Incentives (PLI) scheme is highlighted as the "most transformative reform," covering 14 sectors and attracting investment commitments of INR 2.5 trillion (US$31.3 billion).
• Strategic Sectors: The PLI scheme focuses on both labor-intensive sectors and strategically important, high-tech emerging sectors like semiconductors, Electric Vehicles (EVs), and new energy products (green hydrogen, solar panels).
• EV Ecosystem: The government has committed US$14.5 billion for the EV sector, aiming for manifold growth in adoption (over 10 million vehicles by 2030).
• Competitiveness: Success in complex, high-value sectors will position India as a global manufacturing hub. Other complementary steps include tax competitiveness, simplification of indirect taxes (GST), and efforts to simplify labor laws.

7. Building the Infrastructure of the Future

Accelerated investment in infrastructure, especially transportation and logistics, boosts growth and improves enterprise competitiveness.

• Investment Priority: The Government of India (GoI) has prioritized capital investment (rising to 2.9% of GDP in 2022-23 BE) due to its high multiplier effect on growth and job creation.
• Key Initiatives: The National Infrastructure Pipeline (NIP), which originally envisaged US$1.4 trillion in investment from 2019-20 to 2024-25, outlines comprehensive project needs. The ‘Gati Shakti’ initiative is a master plan covering 25 years, aimed at integrated planning and coordinated implementation across 16 ministries to improve intermodal visibility and synergies.
• Logistics Cost Reduction: A key target of the National Logistics Policy (NLP) is to reduce the cost of logistics from the current 14-18% of GDP to the global best practice of 8% by 2030.
• Financing: The government is attracting private capital through tax concessions for Sovereign Wealth and Pension Funds and enabling Infrastructure Investment Trusts (InViTs).

8. Transition to Sustainable Energy

The transition to sustainable energy addresses climate risks, ensures energy security, and presents major economic opportunities.

• Targets: The GoI targets being net zero by 2070 and achieving 50% of power generation capacity from non-fossil fuel sources by 2030.
• Renewable Energy Capacity: Capacity has surged from 40 GW in 2014 to 166 GW by 2022, with a target of 500 GW non-fossil fuel based generation capacity by 2030.
• Green Hydrogen: Government policies, including a US$2.2 billion incentive program, aim for India to achieve an annual capacity of 5 million metric tonnes of green hydrogen by 2030. India aims to become a low-cost hydrogen producer and meet 10% of global hydrogen demand by 2030.
• Energy Security: Since India currently imports 35-40% of its primary energy needs, this transition is a critical tool for achieving energy independence and protecting the economy from volatile global prices. The availability of round-the-clock emission-free energy is seen as a prerequisite for large-scale investments, especially in manufacturing.

These eight drivers represent the strategic pillars that, if executed effectively, will allow India to capitalize on its demographic advantages, technological progress, and domestic consumption power, leading to the targeted US$26 trillion economy by FY2048.

The vision for India to achieve a US$26 trillion economy by 2047-48 and realize the potential of the 'Amrit Kaal' hinges not only on leveraging existing strengths (the 8 Growth Drivers) but also on addressing specific structural challenges that require focused policy attention to effectively accelerate the growth curve. These areas, acknowledged as needing redressal, are crucial for enhancing India's long-term competitiveness and macro-economic stability.

The sources group the necessary policy actions into several critical areas:

1. Enhancing Ease of Doing Business

Improving the ease-of-doing-business parameters and reducing the regulatory and compliance burdens for enterprises in India are seen as key to enhancing competitiveness, fostering entrepreneurship, and enabling faster economic growth. While the Government of India (GoI) has implemented reforms like the Goods and Services Tax (GST), the Insolvency Code (IBC), digital tools for tax assessment, and labor law simplification, significant areas of concern remain.

Key areas needing policy attention include:

• Enforceability of Contracts: This is a parameter where India lags compared to other countries. The Economic Survey 2020-21 highlighted that the inability to effectively enforce contracts and resolve disputes is the single biggest constraint to ease-of-doing-business in India. Resolving disputes takes an average of 1,445 days, and timely contract enforcement is vital for driving economic growth.
• Payment of Taxes and Disputes: Although tax policy initiatives have aimed at moderation and technology-backed administration, tax disputes still occur due to aggressive positions or ambiguous interpretations of rules. Delays in resolution through Alternate Dispute Resolution (ADR) mechanisms, often due to inadequate capacity, need to be addressed.
• Decriminalization of Economic Laws: Many economic regulations currently prescribe criminal penalties for even minor transgressions, which increases uncertainty, hampers decision-making, and can be a tool for harassment. The GoI is taking steps to decriminalize laws, but faster, more focused action and parliamentary amendments are required.
• Other Regulatory Challenges: Businesses are also challenged by compliance with environmental regulations and regulations related to trading across borders.

2. Ensuring Macro-economic Stability

Sustaining high growth over an extended period requires continued prudent macro-economic management to mitigate domestic and global shocks.

• Fiscal Discipline and Debt Control: Central and state governments must ensure that revenue and fiscal deficits relative to GDP remain within sustainable limits. Prudent fiscal management requires keeping government revenue accounts in balance or surplus to allow capital expenditure to be financed by a sustainable fiscal deficit.
  • The combined debt-GDP ratio rose significantly to an estimated 88.4% in FY2021 due to COVID-19. Restoring this ratio to sustainable levels is a prerequisite for creating fiscal space for priority spending on education, health, and capital expenditure.
  • Maximum policy attention should focus on increasing employment via investments in infrastructure and funding enhanced expenditure on education and healthcare, rather than committing unsustainable subsidies for short-term welfare objectives.
• Boosting Savings and Investment Rates: Since capital is a scarce factor, it is crucial to boost the domestic savings rate while attracting higher levels of global capital to uplift investments and, consequently, growth. Domestic savings have historically been the primary source for financing Gross Capital Formation (GCF), which has averaged around 35% of GDP since FY2008.
• Stabilizing Exchange Rate and Policy Predictability: Continuous focus is needed on stabilizing inflation, minimizing volatility in the exchange rate, and ensuring predictability in policies to de-risk the economy.

3. Prioritizing Human Capital (Education and Health)

To take advantage of India’s unfolding demographic trends and large working-age population, it is imperative to ensure the workforce is educated, skilled, and healthy.

• Increased Expenditure: The combined government expenditure on education (3.1% of GDP) and health (1.4% of GDP) in 2021-22 needs to be increased further.
• Education Reforms: While India produces a large number of STEM graduates, the education system, particularly secondary school education, has weaknesses such as high student-to-teacher ratios and below-expectation outcomes. The success of the National Education Policy (NEP) 2020 depends on effective implementation of its proposed reforms.
• Research and Development (R&D): India has historically underprovided funds for R&D, with the government providing over 55% of the existing funds. Overall allocation of resources must be increased from the current 0.7% of GDP to more internationally comparable levels (the global average was nearly 2.2% in 2018), and the private sector should be encouraged to participate actively.

4. Addressing Urbanization and Energy Challenges

These structural issues pose long-term risks to stability and competitiveness:

• Energy Independence: India currently depends on imports for 35–40% of its primary energy needs, with crude oil being the largest component. Increases in crude oil prices are accompanied by currency depreciation, high inflation, and economic slowdown. There is a need to continually reduce dependence on imported energy by increasing domestic hydrocarbon production and accelerating non-conventional energy sources, as demonstrated in the National Hydrogen Mission. Furthermore, strategies are needed to secure access to critical minerals like Lithium and rare earths, as these could create vulnerabilities during the global transition to decarbonization.
• Power Sector Reforms: Despite progress, the power sector still faces significant challenges, mainly due to losses incurred by power distribution companies (discoms), estimated at INR 900 billion (approximately US$11.3 billion) in FY21. Reforming the sector to make it financially strong and self-sustaining, without reliance on government subsidies, is challenging but necessary to ensure reliable and low-cost electricity supply, which is essential for competitiveness and attracting investments.
• Urbanization Paradigm: India needs to develop its own urbanization model, focusing on sustainable development. Urbanization is expected to exceed 50% by 2046 and contribute about 60% of GDP. This requires substantial investment in urban infrastructure (transportation, housing, drainage, waste management) and concerted action on integrated planning, land regulations, and providing affordable housing. There is also a need to bring census towns under urban regulations and equip urban local bodies with necessary capacity.

In essence, while the "8 Growth Drivers" provide the momentum, the "Areas Needing Policy Attention" represent the friction points—like sand in an engine—that must be removed through sustained structural reforms in governance, finance, and human capital to ensure the targeted growth trajectory towards a $26 trillion economy is realized.