India’s rise to third-largest economy inevitable, say Vaishnaw and Gopinath

Union Minister Ashwini Vaishnaw on Wednesday said India will definitely become the world’s third-largest economy in the coming years, while economist Gita Gopinath said this could happen by 2028 or even earlier.

Speaking at a session during the World Economic Forum Annual Meeting here, Vaishnaw said the key concern was how mounting levels of debt in advanced economies could unfold and what impact that could have on India.

Gopinath said the challenge for India was not becoming the third-largest economy but raising per capita income to higher levels.

Vaishnaw said India has undergone a transformational change over the past decade, marked by focused and well-defined execution. He said this transformation is built on four pillars — public investment in physical, digital and social infrastructure; inclusive growth to ensure the entire society benefits from economic expansion; manufacturing and innovation; and simplification.

“All these put together with the technology platform, we have created…will make sure that India will see a real growth of 6-8 per cent with moderate 2-4 per cent inflation and nominal growth of 10-13 per cent in the next five years,” he said.

“We can say that with a lot of confidence, and what’s working very well is that the entire society is seeing the benefit of it,” he added.

Vaishnaw said the security of the poorest remains a priority for the Prime Minister and the government, and that this focus has helped lift 250 million people out of poverty.

“What’s really a matter of concern on our mind is the global debt, which is there in the rich world and how these mountains of debt will unravel and how that will impact,” he said.

“We saw in Japan a run on the bonds, and if those kinds of things happen on a large scale, it will be a matter of concern as to what would be the impact on our country,” he added.

Otherwise, everything is in proper shape for India to become the third-largest economy in the coming years, he said.

Gopinath said India will become the third-largest economy without any doubt unless something catastrophic happens.

“If you just look at the maths of India’s growth rate relative to Germany and Japan, it will be very hard to say that India won’t get there. Based on current projections, India gets there by 2028, and it can be even sooner than that, depending on how the revision of GDP numbers happens,” she said.

She said substantial reforms have taken place, physical and digital infrastructure is impressive, and tax reforms have been significant.

“To keep the momentum going, and raising the per capita income and getting to the 2047 goal of becoming a developed nation is the challenge, and that will require a steady pace of reforms to get there,” she said.

Gopinath said land acquisition remains a major challenge and a constraint on manufacturing and growth, although some states are experimenting with changes to address the issue.

“Besides, judicial reforms are also very critical,” she said.

She added that labour’s contribution to growth remains low due to complications in hiring, while India’s growth remains capital-intensive. She said the government has passed a good labour reform law, and states need to take it forward, adding that labour market flexibility and skilling of human capital are both critical.

Industrialist Sunil Bharti Mittal said India is in a strong position and will definitely become the third-largest economy.

He said the business community needs an enabling environment, a committed government and stability, all of which are currently available.

“One factor that is coming as a challenge to our growth is the massive competition that is out there in the world today. China had a huge market in the form of the US to grow its economy during the last few decades, and that opportunity is not available to India,” he said.

“We will have to find our own ways. Thankfully, we have a huge market in India itself. We will hopefully sign a deal with the EU soon; several deals have been done, and many are in the pipeline, but the big one is the US, and hopefully that will also get done soon,” he added.

Mittal said India is likely to grow at 6-8 per cent even as global growth settles at much lower levels, adding that intense global competitiveness remains a key risk.

Gopinath said pollution poses a serious challenge for India and carries a high economic and human cost. Addressing it on a war footing must be a key national mission, she said.

Asked how India is insulating its growth story from high US tariffs, Vaishnaw said India remains a resilient economy with strong macro and micro fundamentals.

“Our producers are finding new markets, and our exports have actually increased despite high tariffs. We are expanding to new markets and also trying to find good and healthy trade agreements in the existing markets. In the last ten years, India has emerged as a very good value chain partner for the world,” he said.