The Indian economy in 2040

Although too many unanticipated technological and political developments may occur between now and 2040, this paper tries to predict, after a quick look at the experience of last four decades. Current estimates of population below the poverty line in India range from 26-44%, with great regional variations. International experience shows that only through grow h based on outward orientation and competition can a long-lasting solution to poverty and unemployment be found. The forces of globalisation, driven by the private sector today, are not likely to be pushed back. By 2040, India will be an integral part of a much more integrated world, particularly so with the South Asian region. While external sector reforms have taken place in India, domestic reforms (in agriculture, the rural sector-credit, insurance and extension services, subsidies, legal and tax reforms and physical and social infrastructure)-which can dispel the notion that reforms are pro-rich and anti-poor-have been tardy. But the vested groups that oppose reforms are vocal, the groups who will benefit from reforms tend to be diffused and less vocal. Thus steady state rather than big bang reforms are likely to take place in India. The state's role will be to focus on governance, including social and physical infrastructure and law and order. During the next four decades, India is likely to be able to achieve a real per capita GDP growth rate of 5.5%. As a consequence, measured in purchasing power parity (PPP) terms, India-the fourth largest economy today-will overtake Japan by 2020 and the United States by 2040. (C) 2004 Elsevier Ltd. All rights reserved.