The 16th Finance Commission Chairman Arvind Panagariya on Saturday said India's aim to become a developed nation by 2047 is a "realisable ambition" for which the country's per-capita income needs to grow at 7.3 per cent in dollar terms to $14,000 over the next 24 years.
India's per-capita income, in 2023-24 dollar terms, is about $2,570, which is very low compared to countries like South Korea, Taiwan, United States, and other European nations.
Speaking at the 49th Civil Accounts Day, Panagariya said with the existing technology, coupled with reasonable capital accumulation and skill acquisition, India has enormous room for catching up with the per-capita income of developed nations and meet World Bank's definition of $14,005 per capita income annually.
Today, our per capita income in dollars is about $2,500. To get to $14,000 in 24 years or by 2047-48, what growth rate do I need for per capita income? my per capita income from 2023-24 onward has to grow annually at 7.3 per cent, Panagariya said.
He further said that as per the estimates by the United Nations, population in India would grow 0.6 per cent by 2050. This would mean that to achieve that 7.3 per cent growth in per capita income, India's GDP will have to grow at 7.9 per cent during the next 24 years.
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Our growth rate(in real dollar terms) for the last 21 years was at 7.8 per cent To get from 7.8 per cent (GDP growth) to 7.9 per cent is entirely feasible. Our prospect of Viksit Bharat is a realisable ambition, Panagariya said.
He further said that India needs to carry out necessary reforms, which will facilitate the emergence of the labour-intensive industry on a larger scale so as to create good jobs for the masses.
If You see, there are good jobs certainly for the very highly skilled. We have the pharmaceutical industry, machinery industry. These are all, you know, for engineers for talented engineers, etc. You got the jobs. But when it comes to the masses, I think, you know, there is a jobs issue, Panagariya noted.
To a question on whether time is ripe for India to move towards capital account convertibility, Panagariya said India has been managing exchange rate and that has served the country well. I am more conservative on this. I would rather go slow on that one. So I will still wait for quite a while, actually, for our per capita income to rise to at least 8,000-10,000 US dollars," he said.
Panagariya also said that since 1991 and until today, the exchange rate management has been generally a positive contributor. If you dropped full capital account convertibility, then effectively the exchange rate management is out of your hands. You cannot intervene then, he said. India can leverage US tariff threat for mutual reductions: Panagariya
The Chairman of the 16th Finance Commission, Arvind Panagariya, said that the looming threat of reciprocal tariffs from the US could be turned into a positive if India can leverage it to secure mutual tariff reductions.
He, however, cautioned that if it results in a tariff war, where the US imposes tariffs on India and New Delhi retaliates with its own tariffs, it would have an "unfortunate" outcome.
"We have a very good opportunity to do a win-win bargain. So we can really turn it into a win-win situation. Now that the reciprocal tariff threat is coming, it is doubly beneficial that we also, in the process, hold the United States to reciprocal tariff reductions as well, and get access for our goods that we export to them," Panagariya said.
Panagariya was replying to a query on how he foresees the impact of US tariff volatility on India over the next 3-4 years.
US President Donald Tariff on multiple times said that America will impose reciprocal tariffs against India. He has also alleged that India is a 'tariff king' and 'tariff abuser'.
The US has already announced a 25 per cent tariff on steel and aluminium. It will come into force from March 12. India also exports these goods to the US.
In 2018, when the US imposed duties on certain steel and aluminum goods, India in 2019 imposed retaliatory duties on 29 American goods including apples.
Speaking at the 49th Civil Accounts Day, Panagariya also said that India has a "very good" opportunity to do a win-win bargain on reciprocal tariffs.
"Our own (economic) liberalisation (in 1991) makes us more competitive, forces us to become more efficient and in that process, if we were to do a reciprocal tariff bargain, we can also get better access to the US market," he said adding sectors like textiles and clothing can get greater market access in the US.
"We can turn it (reciprocal tariffs) into a positive. If it ends up in a kind of tariff war in which the US hits us with tariffs and we hit back on the US with tariffs, that outcome will be kind of unfortunate. That will not be to the advantage of either side," he said.
During the recent visit of Prime Minister Narendra Modi to Washington, India and the US announced their commitment to more than double the two-way commerce to $500 billion by 2030 and negotiate the first tranche of a mutually beneficial, multi-sector Bilateral Trade Agreement (BTA) by fall of 2025.
In 2023, the US-India bilateral trade in goods and services stood at $190.08 billion ($123.89 billion in goods and $66.19 billion in services trade). That year, India's merchandise exports to the US stood at $83.77 billion, while imports were $40.12 billion, leaving a trade gap of $43.65 billion in favour of India. The country's services export to America was $36.33 billion in 2023, while imports were aggregated at $29.86 billion.
The trade gap (difference between imports and exports) was $6.47 billion in favour of New Delhi. During 2021-24, America was the largest trading partner of India. The US is one of the few countries with which India has a trade surplus.
In 2023-24, the US was the largest trading partner of India with $119.71 billion in bilateral trade in goods ($77.51 billion worth of exports, $42.19 billion of imports, with $35.31 billion trade surplus).
Commerce and Industry Minister Piyush Goyal will visit Washington next week. he may hold talks with US Trade Representative (USTR) Jamieson Greer and US Commerce Secretary Howard Lutnick during the visit.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
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