India unlikely to grow at 10%: Ruchir Sharma tells Nikhil Kamath what's holding it back

Economist and investor Ruchir Sharma has argued that India will not achieve the kind of sustained, high growth rates seen in East Asia, calling 6 per cent a more realistic long-term benchmark for the economy.

"Why India will never achieve a growth rate like China of 9 or 10%...we have all now reconciled to the fact that we are a 6%-type economy. The ambition of growing at 9, 10% doesn't even exist anymore," Sharma told Zerodha's Nikhil Kamath. "And partly it's because of the recognition that in a country like India, our society, or whether it's our politics, is never going to ever allow that sort of runaway growth to take place, which requires very little welfare and very little protection from what's happening internationally."

"Like, you allow foreign capital to come, you don't have much of tariffs. It's very difficult in this country to have that sort of model. So, that's the reason why India is unlikely to ever grow at 9-10% on a sustained basis, which East Asia did, and why we are now reconciled to growing at 6%. That type of growth rate is what we are, sort of-- seems to be what we are comfortable with."

When asked whether India should shield the domestic industry before opening up, Sharma dismissed the idea. "We tried that in the 1960s. We tried that in the 1970s. It was called import substitution, and it didn’t work. It left us very uncompetitive."

Sharma compared India's trajectory with East Asia's. "This model of growing at 8-9% a year is very much an East Asian economic model. I've studied East Asia deeply. And I think that these countries were much more about allowing for competition and allowing for very little duties and stuff. Of course, the state played some role which is that they, sort of, favoured some industries and didn't favour others and all that, but it was largely giving people lots of economic freedom." 

He said one key difference was welfare. "The more important point that I make here is that they had no welfare state. It appears ruthless and heartless to say this, but are you better off spending that money on creating infrastructure, which helps create growth in the future, or if you give people a lot of freebies and other stuff that sort of doesn't enable them to go out and earn income so much on their own or create wealth over a period of time. That's the difference?"

The East Asian growth lesson

During East Asia's high growth period, especially among the "Four Asian Tigers" (Hong Kong, South Korea, Taiwan, Singapore), annual GDP growth rates were typically well above 6%, often ranging between 7% and 10% per year over three decades from the 1960s to the 1990s.

The average annual GDP growth rate during East Asia's high growth period was broadly between 6% and 10%. China, after its reforms in 1978, sometimes achieved growth rates of 9–10% annually through the 1980s and 1990s.

India's current trajectory

India's economy continues to outperform peers but at levels well below East Asia's historic highs. GDP grew 7.8 per cent in April–June, the fastest pace in five quarters, following 8.4 per cent growth in January–March 2024. In comparison, China expanded by 5.2 per cent in April–June. The Reserve Bank of India projects real GDP growth for 2025–26 at 6.5 per cent, with quarterly growth expected between 6.3 and 6.7 per cent.