India to become 3rd largest economy in world with GDP of $5 trillion in 3 years: Finance Ministry

With the help of continued reforms, the Finance Ministry in its January 2024 review of the economy said India is expected to become the third-largest economy in the world with a GDP of $5 trillion in the next three years and touch $7 trillion by 2030. Ten years ago, India was the 10th largest economy in the world, with a GDP of $1.9 trillion at current market prices. Today, it is the 5th largest with a GDP of $3.7 trillion (estimate FY24), despite the pandemic and despite inheriting an economy with macro imbalances and a broken financial sector.

It noted ‘This ten-year journey is marked by several reforms, both substantive and incremental, which have significantly contributed to the country’s economic progress’. It added these reforms have also delivered an economic resilience that the country will need to deal with unanticipated global shocks in the future. It further said that in the next three years, India is expected to become the third-largest economy in the world, with a GDP of $5 trillion. However, ‘The government has set a higher goal of becoming a ‘developed country’ by 2047. With the journey of reforms continuing, this goal is achievable.’

The Nirmala Sitharaman-headed ministry stressed that the reforms will be more purposeful and fruitful with full participation of state governments. The participation of states will be fuller when reforms encompass changes in governance at the district, block, and village levels, making them citizen-friendly and small business-friendly and in areas such as health, education, land and labour, in which states have a big role to play. It said ‘the strength of the domestic demand has driven the economy to a 7 per cent plus growth rate in the last three years…in FY25, real GDP growth will likely be closer to 7 per cent’, and added there is, however, considerable scope for the growth rate to rise well above 7 per cent by 2030.

The review observed that it is eminently possible for the Indian economy to grow in the coming years at a rate above 7 per cent on the strength of the financial sector and other recent and future structural reforms. Only the elevated risk of geopolitical conflicts is an area of concern. Furthermore, under a reasonable set of assumptions with respect to the inflation differentials and the exchange rate, India can aspire to become a $7 trillion economy in the next six to seven years (by 2030).