Raghuram Rajan's Forecast: India Faces Lower-Middle-Income Status by 2047 Unless Growth Surpasses 6%

Raghuram Rajan, former RBI chief, highlighted a demographic concern, noting that certain southern states in India are experiencing population growth below the reproduction rate. This implies a decline in fertility rates, potentially leading to slowed overall population growth.

Dec 16, 2023 - 13:20
Dec 16, 2023 - 13:28
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Raghuram Rajan's Forecast: India Faces Lower-Middle-Income Status by 2047 Unless Growth Surpasses 6%

Hyderabad, December 16: Renowned economist and former Reserve Bank Governor, Raghuram Rajan, issued a stark warning about India's economic trajectory, emphasizing that the nation could remain stuck in the lower-middle-income bracket unless it accelerates its growth rate beyond the current 6 per cent per annum. Speaking at a program organized by Manthan in Hyderabad, Rajan underscored the critical implications of a stagnant growth rate coupled with an aging population.

Rajan projected that if India continues to grow at its current rate, it will only reach the status of a lower-middle-income country by 2047, commonly referred to as "Amrit Kaal" or the golden period. He highlighted the demographic challenge, asserting that the nation would exhaust its demographic dividend by that time. The demographic dividend refers to the economic boost a country experiences when the proportion of its working-age population is higher than the non-working-age population.

"If you do the math, at 6 per cent a year, you double every 12 years, and therefore in 24 years, we'll be four times our per capita income," Rajan explained. Currently, India's per capita income hovers just below $2,500 per person. Extrapolating at the existing growth rate, he argued that the country would not achieve true prosperity but instead linger in the lower-middle-income bracket.

Rajan pointed out the concerning trend in some southern states where the population growth has fallen below the reproduction rate. This indicates a decline in fertility rates, potentially leading to an aging population. The economist expressed worry that if India fails to boost its growth rate, it risks grappling with the challenges of an aging population before attaining the desired economic affluence.

"The current pace of growth is not enough to employ all those who are entering the labor force and insufficient to make the country get rich before it gets old," Rajan cautioned. He urged for strategic economic policies and initiatives to foster faster growth, emphasizing the need to address the employment demands of the burgeoning labor force.

As India stands at a critical juncture in its economic development, Rajan's words serve as a wake-up call for policymakers and stakeholders to reevaluate and recalibrate strategies to ensure sustained and robust economic growth in the coming decades. The urgency lies in steering the nation towards a trajectory that not only avoids premature aging but also propels it into the realm of economic prosperity.

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