CHENNAI: Union Finance Secretary TV Somanathan on Saturday said that India may need neither a growth model akin to China's nor the demographic dividend to become a developed nation by 2047. A more efficient use of the country's limited resources can get the job done.
Delivering the G Ramachandran Endowment Lecture at Madras School of Economics on "Changing Times: The Role of Government Efficiency", which was attended by State Finance Minister Palanivel Thiaga Rajan, Somanathan said India would need to have a per capita income of USD 18,000 by 2047 to attain the status of a developed nation.
"India currently has a per capita income of USD 2,300 in the market exchange rate terms. As per calculations being done, India needs to grow roughly at a rate of 7 per cent to 7.5 per cent compound for this entire quarter century," he said.
Stating that countries had achieved the developed nation tag without ever reaching the 6% growth rate, he said it was not necessary that one had to grow as per the China and Japan model to become a developed nation.
"Of course, India has to grow as fast as it can. There is no need to panic if we don't grow at some particularly targeted growth (rate) or we don't grow necessarily as fast as China or Japan in their peak periods of growth," he said.
Stating that India has a narrow demographic window to achieve developed country status, he said: "One should also not assume that if we miss the demographic bullet train, we will never reach our destination. We may get there at a slower rate. But we will get there."
Highlighting the growth of China over the 25 years from 1994 and 2019, he said it was due to rapid liberalisation of international trade. The World Trade Organisation was formed in 1995 and China was admitted despite not meeting the basic rules of admission. The era had less amount of great power conflict then.
Stating that during the proposed Amrut Kaal (2022 to 2047) the world could witness increasing restrictions on international trade, the Union finance secretary said it was difficult to foresee what the next 25 years could be.
"There is already a tendency to onshore or front shore (keeping supply chains in friendly countries) and thirdly, we could see a forceful action by developed countries on climate change and higher interest rates. We may also see higher interest rates, and we are also home to the younger population along with sub-Saharan Africa. Some of these may favour India in the next 25 years," he said.
He also said that trying to ape China's model has serious limitations. "We have to do something different from China, whose growth was more due to high investment. The productivity of China in growth is less than 25 per cent," he said.
He said India needs to be more efficient, and more productive in the use of its limited resources because resources would not be more abundant as it was for China. He highlighted the need for governance efficiency by increasing the power of delegation.
Noted economist and former governor of the Reserve Bank of India C Rangarajan, however, questioned the estimated per capita income for the next 25 years. Whether it would be the same in the next 25 years or it should be adjusted remained a question. It would also depend on what would happen to the US dollar in the next 25 years, he added.
Secretary of Planning and Development Vikram Kapur and former bureaucrats were also present.