India Needs to Grow Eight Percent Yearly to Reach Target: FM
The government has established a goal to transform India into a developed economy by 2047, under the initiative known as ‘Viksit Bharat’.
To achieve this objective, the Finance Ministry indicated that the nation needs to grow at a rate of 8 percent annually over the next decade, according to reports.
The ministry informed lawmakers that India's economy requires an annual growth rate of around eight percent over the next ten years, particularly amid increasing geopolitical challenges. It anticipates this growth will primarily stem from domestic consumption and investments, according to the report.
The government projects India's economic growth at 6.3-6.8 percent for the current financial year ending March 31 (FY 2024-25), which is roughly in line with last year’s growth of 6.5 percent, but significantly lower than the 9.2 percent recorded in FY23-24.
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These comments are consistent with economists' predictions that India needs to maintain an annual growth rate of 8-9 percent to meet the Viksit Bharat 2047 target, as noted in the report.
Additionally, the ministry stated that to become a developed economy by the targeted timeline, India must increase its investment rate to approximately 35 percent of GDP from the nearly 31 percent currently.
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In light of an unpredictable trade environment, including 50 percent total tariffs imposed by the United States on Indian goods, New Delhi is seeking to boost domestic demand through anticipated consumer tax reductions, following personal tax cuts made in February. Meanwhile, the central bank has lowered rates by 100 basis points this year.
The 50 percent tariff could potentially reduce growth by up to 40 basis points in 2025-26, the report mentioned.
Importantly, these estimates by the ministry were made in June, prior to the additional 25 percent tariffs imposed by the US (increasing the total to 50 percent), which US President Donald Trump described as "punishment" for importing oil from Russia.
Earlier this month, India-US trade negotiations encountered difficulties as New Delhi did not agree to provide Washington access to its extensive agriculture and dairy markets. The finance ministry highlighted that India is focusing on enhancing opportunities for its labour-intensive exports, which include textiles, apparel, and leather goods.