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Arvind Panagariya, Chairman of the 16th Finance Commission, has asserted that India's ambition to achieve developed nation status by 2047 is not merely a pipe dream but a realistically attainable goal. Speaking at the 49th Civil Accounts Day, Panagariya outlined the necessary economic trajectory, emphasizing that India's per capita income must grow at an impressive 7.3% annually in dollar terms to reach USD 14,000 over the next 24 years. This benchmark, USD 14,000, aligns with the World Bank's definition of a developed nation's per capita income. Currently, India's per capita income stands at approximately USD 2,570 (in 2023-24 dollar terms), a figure significantly lower than that of developed economies like South Korea, Taiwan, the United States, and various European countries. Panagariya's optimism stems from the belief that India possesses the existing technological foundation, coupled with reasonable capital accumulation and skill acquisition, to substantially bridge the income gap and converge with developed nations. He emphasizes that there is “enormous room” for India to “catching up”. The key to realizing this ambition, according to Panagariya, lies in sustained and robust economic growth. Achieving the target per capita income necessitates an overall GDP growth rate of 7.9% annually for the next 24 years, considering a projected population growth rate of 0.6% by 2050, as estimated by the United Nations. The historical context provides further support for Panagariya's confidence. India's GDP growth rate over the past 21 years has averaged 7.8% in real dollar terms. He views the relatively small increase from 7.8% to the required 7.9% as entirely feasible. This historical performance demonstrates India's existing capacity for high growth, providing a solid foundation upon which to build towards the Viksit Bharat vision. However, Panagariya also stressed the importance of implementing crucial reforms to facilitate the growth of labor-intensive industries on a larger scale. This is deemed essential for creating a sufficient number of good jobs for the masses, addressing the existing employment challenges, particularly for those without highly specialized skills. He noted that while there are good jobs available for the highly skilled, in sectors like pharmaceuticals and machinery, the creation of sufficient employment opportunities for the less skilled workforce remains a critical priority. This suggests a need for policy interventions that promote sectors requiring a broader range of skills and offer opportunities for upward mobility. It’s not just about raw economic growth, it’s about inclusive growth. The availability of jobs is directly related to the societal and economic well-being of the population. The type of jobs created also play a crucial role. If the economic reforms do not sufficiently address the jobs issue, there will be social consequences.
Furthermore, Panagariya addressed the question of capital account convertibility, a complex and often debated issue in Indian economic policy. He expressed a cautious and conservative stance, advocating for a gradual approach to capital account convertibility. He believes that India's existing exchange rate management system has served the country well and that premature full capital account convertibility could potentially jeopardize this stability. Panagariya articulated that relinquishing control over exchange rate management could have unintended consequences, especially in the absence of a robust and resilient economy. He suggested that India should wait until its per capita income rises to at least USD 8,000-10,000 before considering full capital account convertibility. He explained that full capital account convertibility would limit the government’s ability to intervene in the exchange rate market, potentially making the economy more vulnerable to external shocks and capital flight. This cautious approach reflects a desire to maintain macroeconomic stability and avoid potential risks associated with rapid liberalization. The management of the exchange rate has been a positive contributor since 1991. If there is a full capital account convertibility, then effectively the exchange rate management is out of one’s control. You cannot intervene then. The caution around full capital account convertibility is that it prevents the ability to manage the exchange rate, therefore it can create vulnerabilities. The conservative view on convertibility and the emphasis on labor-intensive industries points towards a desire for sustainable and inclusive growth. The goal is not just to achieve a high GDP growth rate, but to ensure that the benefits of growth are widely shared and that the economy is resilient to external shocks. This requires a careful balancing act, between promoting economic liberalization and maintaining macroeconomic stability. In summary, Arvind Panagariya's remarks provide a comprehensive roadmap for India to achieve its ambitious goal of becoming a developed nation by 2047. The roadmap highlights the crucial role of sustained economic growth, strategic policy reforms, and a cautious approach to capital account convertibility.
The path to ‘Viksit Bharat’ by 2047, as articulated by Panagariya, is not without its challenges and complexities. While a 7.3% annual growth in per capita income seems achievable based on historical trends, the actual execution requires sustained policy focus and effective implementation. The emphasis on labor-intensive industries is particularly significant, as it addresses the critical need for mass job creation. This requires not only attracting investment in these sectors but also ensuring that the workforce possesses the necessary skills and training to meet the demands of these industries. Furthermore, the discussion on capital account convertibility underscores the importance of balancing economic liberalization with macroeconomic stability. A premature move towards full convertibility could expose the Indian economy to vulnerabilities, especially in the face of global economic uncertainties. The roadmap for ‘Viksit Bharat’ also hinges on several assumptions, including continued global economic growth, favorable external conditions, and effective governance. Any significant deviation from these assumptions could potentially derail the progress. In addition, the focus on GDP growth and per capita income, while important, should not overshadow other critical aspects of development, such as human development, environmental sustainability, and social equity. A truly developed nation should not only be economically prosperous but also socially inclusive and environmentally responsible. The success of ‘Viksit Bharat’ will depend on India's ability to address these broader development challenges. The vision of Viksit Bharat by 2047 represents a bold and ambitious goal for India. Achieving this vision requires not only sustained economic growth but also strategic policy reforms, effective governance, and a commitment to inclusive and sustainable development. While challenges and complexities lie ahead, Panagariya’s perspective offers a roadmap for India to realize its full potential and emerge as a leading developed nation in the coming decades. Sustaining high growth, expanding job opportunities, and ensuring macroeconomic stability are vital for reaching the goal of being a developed nation by 2047. The vision serves as a guiding star for India's economic development and aspirations for the coming decades. There are challenges, however the message is primarily optimistic and paints a picture of the roadmap to reach the aspirational goal of Viksit Bharat by 2047.
Source: Viksit Bharat'2047 a realisable ambition, per capita income needs to grow at 7.3%: Panagariya