T.V. Mohandas Pai's prediction: India will be a leading global power by 2029

Ten years of the NDA government from 2014 to 2024 will see India grow from a nearly $2-trillion economy to $3.7 trillion—an absolute growth of 95% at 7% CAGR in dollar terms despite Covid-19. Per capita income is $2,600. In rupee terms, nominal GDP has grown from Rs 113 lakh crore in FY14 to an estimated Rs 302 lakh crore in FY24—an absolute growth of 167% at 10.3% CAGR, again despite the global recessionary effects of the pandemic. This is an outstanding achievement; this period has recorded the best growth in India’s economic history. The nation is now officially a Top 5 economy on track to become a Top 3 economy by the end of 2026.

Highlights of the decade include transformative banking sector reforms, leading to low NPAs and clean balance sheets, far-reaching reforms in taxation, especially GST and I-T; the development of infrastructure on a scale never seen before in the country with significant investments in railways, airports, ports, and roads; an increased investment of $1 trillion in gross capital formation annually which amounts to over 31% of GDP, a step-function elevation in India’s global standing; services sector exports reaching $400 billion by 2024 with surpluses of $220 billion; foreign exchange reserves of $600 billion; the start-up sector growing to $550 billion of value with 109 unicorns; and universal digital and financial inclusion with the development of the IndiaStack.

Additionally, PM Modi has ensured almost all Indians can access basic necessities—a roof over their heads, a working toilet, power in their switches, food on the table, gas connection in the kitchen, clean water in the tap, rural road connectivity, education, mobile phones, access to internet and digital platforms at some of the lowest data rates globally, bank accounts, money in the bank, income relief support through DBT, affordable healthcare, and various types of insurance. For the first time in the history of Independent India, most citizens can focus on personal advancement without worrying about basic survival.

The stage is set for India to accelerate its growth over the next decade. Over the next five years, from 2024 to 2029, India’s GDP is estimated to reach $5.6 trillion (at Rs 82 to $1, from Rs 302 lakh crore in FY24 to roughly Rs 532 lakh crore in FY29 at 12 per cent nominal CAGR). The nation will have overtaken Japan and Germany to become the third-largest economy globally, behind only the US and China.

Over the next five years, gross capital formation will increase and continue in excess of $1 trillion annually. The massive infrastructure investment will have yielded significant productivity leaps and lower supply chain costs, providing impetus to India’s volume manufacturing, production, employment, and export capabilities. In five years, these could increase India’s goods exports to a level where the trade balance becomes positive, especially in light of the large services sector export surpluses.

Globally, India will remain an attractive FDI destination, with an estimated $75-80 billion annually for five years. This capital will be channelled into strengthening industrial capabilities, developing new technologies, building infrastructure and upskilling the population.

With rising aspirations and the government’s push to improve access to education, gross enrolment rates in higher education may increase from 28% to about 35-36% in 2029. The system will produce 15 million graduates every year. These graduates will be a valuable resource in accelerating India’s capabilities in research, manufacturing, information technologies, financial technologies and more.

With all these various vectors converging, employment opportunities will increase, especially in higher growth sectors in industry and services. However, India has a wage problem—most formal jobs currently pay less than Rs 25,000 per month. This should increase with economic growth and policy interventions like increasing minimum wages, especially in urban areas. With elevated aspirations and the advent of the digital age, wage expectations are high and are only expected to increase.

India’s digital prowess will continue to strengthen too. India is the world’s third-largest digital power and is at a crucial point. The nation pioneered population-scale digital public goods (DPGs) like Aadhaar and UPI (Unified Payments Interface) that form the foundation for financial inclusion of India’s 1.4 billion-strong population.

The nation will also continue to lead the world in start-ups, currently in third position. India’s tech start-up sector too is booming, with nearly 115,000 start-ups and a total investment of $140 billion since 2014. It has yielded 109 unicorns and $550 billion in value created, which is expected to grow to 250 unicorns and $1.5 trillion in value by 2026. By 2029, India’s start-up sector could close the gap in value to China’s ecosystem. With the continued growth of India’s spectacularly successful IT industry, the nation is also on track to host more software engineers than the US in the next two years.

With tangible economic growth, significant investments and infrastructure spending, increased productivity with reduced logistics costs, rising domestic consumption indicated by GST, a robust banking system with adequate capitalisation to meet the needs of the growing economy, healthy foreign exchange reserves, increased formalisation and job creation, and a highly matured tech services and innovative start-up ecosystem, Indians can look ahead to the next five years with great optimism. 

The author is Chairman of Aarin Capital. With inputs from Nisha Holla, Technology Fellow, C-CAMP. Views are personal