Viksit Bharat'2047 a Realisable Ambition, Per Capita Income Needs to Grow at 7.3%: Panagariya

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% 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%,” Panagariya said.

He further said that as per the estimates by the United Nations, population in India would grow 0.6% by 2050. This would mean that to achieve that 7.3% growth in per capita income, India’s GDP will have to grow at 7.9% during the next 24 years.

“Our growth rate(in real dollar terms) for the last 21 years was at 7.8%… To get from 7.8% (GDP growth) to 7.9% 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.