Indian economy may grow to $7 trn by 2030: Deutsche Bank

08 Jan '20

3 min read

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India’s economy is likely to grow two and half times to $7 trillion by 2030 from about $3 trillion now, making India the world’s third largest economy, according to a research report titled ‘Imagine 2030’ by Deutsche Bank, which said this implies nominal gross domestic product (GDP) growth is likely to average just over 10 per cent through the next decade.

The sharp slowdown in recent years, despite Indian economy’s promise over the last decade, is not indicative of what is in the store for the next decade, the bank said.

“Despite its promise over the last decade, the Indian economy has slowed down sharply in recent years. That has led some to predict the decade ahead will be one of lower growth and frustration that India’s enormous potential will, yet again, go unfulfilled," the report said.

As far as India’s economic growth is concerned, it may remain below potential in the near term. However, ongoing government measures will give major push to its potential in the future, it said.

“For starters, to offset the demand slowdown, the government took the bold decision in September (2019) to meaningfully cut the corporate tax rate. This will likely incentivise greater foreign direct investment flow into the country and support private investment in the economy, which has remained weak over the last eight years," the report said.

Additionally, the Reserve Bank of India’s decision to cut the key lending rate by 135 basis points in calendar 2019 will revive growth, it said. “Apart from these stimulus measures, reforms initiated in the last few years, should also improve the medium term outlook," it added.

“As economies with significantly higher informal sector employment, such as India, typically have lower per capita income, policies which are aimed at the greater formalisation of the economy should help to accelerate per capita income levels," the report said.

Reforms such as demonetisation and roll out of the goods and services tax (GST) are likely to play major role in formalisation of the economy and will bear fruits in the next decade, the report said.

While demonetisation has resulted in incentivising a faster pace of digitisation, GST, by the very nature of its design, will expedite formalisation of the economy, and will consequently improve the fiscal and growth dynamics of the country, it added.

Demonetisation and GST apart, India’s bankruptcy law that came into force in 2017 will also help drive growth in the upcoming decade. Even the Reserve Bank’s move to adopt inflation targeting and establish positive real interest rates in the economy will boost growth in the next decade.

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