Raghuram Rajan Predicts India Will Stuck in Lower-Middle Economy by 2047

The former Reserve Bank Governor, Raghuram Rajan, warned that India might remain a lower middle-income economy by 2047 if the growth rate continues at 6% without population growth. He emphasized the risk of aging before getting richer due to insufficient growth. Meanwhile, the World Bank maintained India's GDP growth projection at 6.3% for 2023-24, noting the country's resilience amid global challenges.

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Former Reserve Bank Governor Raghuram Rajan, speaking at a Manthan-organized event in Hyderabad, projected India's economic landscape with a cautionary tone. He stressed that India, even by 2047, might linger as a lower middle-income economy if the growth rate, currently at 6%, persists without an accompanying surge in population.

Rajan’s calculations lay bare the potential trajectory: with a consistent 6% growth rate, the per capita income might quadruple in 24 years, reaching around $10,000 per person. However, this would still not propel India into higher economic brackets, trapping it in the lower middle-income bracket.

The economist's concern resonates with the demographic shift—some southern states witnessing a decline in fertility rates below the replacement level. This demographic slowdown implies an imminent aging population, potentially burdening the economy before it achieves significant wealth accumulation.

Rajan's remarks pivot around a central dilemma: the pressing need for accelerated growth to provide employment opportunities for the burgeoning workforce. He highlighted the inadequacy of the current growth pace, emphasizing that without substantial acceleration, India risks aging before experiencing substantial economic prosperity.

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On another front, the World Bank, in its India Development Update, maintained its projection of India's GDP growth at 6.3% for the fiscal year 2023-24. Acknowledging India's resilience amidst global adversities, the report attributes this stability to robust domestic demand, significant public infrastructure investments, and a strengthened financial sector.

Despite external challenges, India exhibited commendable growth in the previous fiscal year, emerging as one of the fastest-growing major economies among the G20 nations. This growth, nearly double the average of emerging market economies, underlines India's economic fortitude amid global uncertainties.