India attaining ‘developed country’ status by 2047 is not easy, as there are many challenges to overcome, such as geopolitical disturbances and uncertainties arising out artificial intelligence, says noted economist and former Chairman of the Economic Advisory Council to the Prime Minister, Dr C Rangarajan.
Speaking at a function organised in memory of late civil servant G Ramachandran (the memorial lecture was delivered by Dr Suman Bery, Vice Chairman, Niti Aayog), Dr Rangarajan pointed out that developed countries have a per capita income of $14,000, which would rise to $18,000 by 2047; comparatively, India’s per capita income is $2,500 today.
To increase India’s per capita income around 7 times, India would need to grow at a nominal rate of 10 per cent, or real rate of 6-7 per cent. A 6-7 per cent growth is achievable for a few years, but to get that rate of growth over 25 years would be tough, especially towards the end of the period, Rangarajan said.
Trump era
He further noted that countries like China and South Korea grew in a time when the global trade was booming. He expressed doubts whether such a boom in global trade would continue, especially in view of US President-elect Donald Trump’s stance towards raising import duties.
Rangarajan said that if the incremental capital-output ratio (ICOR), which tells how much of capital is needed for one unit increase in output, is reckoned at 5, then India’s investment rate would need to be 35 per cent, compared to 30 per cent now.
However, if the ICOR could be brought down to (say) 4, which indicates an increase in productivity, then lesser investment rate would be called for.
Would artificial intelligence deliver this increase in productivity? Rangarajan, also a former Governor of the Reserve Bank of India, noted that nobody knows as yet whether AI is a boon or a bane. He said that AI could result in large unemployment, even if it could create employment at the higher levels of skills.
He said that policies should be made for removing impediments faced by individual industries too, and not just overarching policies for the general economy.