'Not a very plausible calculation': Ex-CEA Arvind Subramanian on Viksit Bharat by 2047

Former Chief Economic Advisor (CEA) Arvind Subramanian has cast doubt on India's ability to achieve its 2047 "Viksit Bharat" goal, arguing that the economic math simply does not add up. "You can't escape the tyranny of arithmetic. And the arithmetic is very simple — today our per capita GDP is about $2,500 in market exchange rate terms. To become a developed economy, it needs to become $12,500 — a fivefold increase in per capita GDP over 22 years. That requires growth rates of magnitudes that we have never seen historically in India for that period of time," Subramanian said in an interview with Karan Thapar for The Wire.

He noted that India would need to sustain 7-8% growth consistently for the next 25 years, something the country has never done before. "We've had one bout of similar rates of growth. So, I'm talking about something like 7 to 8% growth consistently for the next 25 years to reach that 'Viksit Bharat' target —maybe a little bit more. And we've never been able to do that."

"Looking back over 40 years, we've done about 6% and that too because two things were important to get that 6% — one was when we broke out of the socialist license quota Raj. We did a lot of reforms which gave us a boost. And then in the 2000s, when we were growing at close to 10% for about 7-8 years, the world economy did very well," he explained.

Subramanian believes that neither massive economic reforms nor a favorable global environment, both of which drove India's past high-growth phases, seem likely today. "The tyranny of arithmetic plus the fact that what you need to do you've never done before, and what you did before you probably cannot replicate again. So putting it in a more forward-looking sense, we need to have the kind of reforms of the economy of the scale that we did in the 1990s, and we need to have a favorable global economic environment—both of which are now looking very uncertain for India today. So if you combine the tyranny of arithmetic, our inability to do these reforms, and the global environment, I think this is not a very plausible calculation to think that India will become a $12,500 per capita GDP economy in 22 years," he said.

'India's slowdown is structural, not temporary'

Subramanian also dismissed the notion that India's economic slowdown is short-term, asserting that the economy has been structurally weak for a long time. "In my view, unambiguously, it's not a short-term, temporary slowdown, it's a structural slowdown. In a sense, the Indian economy has been weak for a very long time, obscured a little bit by the recovery from Covid. And of course, also obscured by the fact that the numbers tend to be a bit high and maybe they obscure some of the slowdown as well. But yes, it's slowing down, not just cyclically but structurally, and has been weak for a very long time," he said.

He pointed to weak consumption, investment, and exports, questioning how GDP growth could remain high when all core economic indicators are sluggish. "We've had growth at whatever 7-8%, and yet consumption has been at 3%, investment has been weak, exports have been weak. So how come if all the constituents of GDP are so weak, how come GDP itself is so high?" he said.

Subramanian warned against quick fixes like tax cuts, stating that the real issue is low-income growth and weak employment creation. "Consumption is down because growth and incomes are down, not the other way around. And so, we need a policy to address long-term growth and job creation. That's the diagnosis, and from that follows the prescription. And therefore, another corollary of that is—we should not be looking to the budget for quick fixes like, oh, tax cuts because consumption is weak. Because that's not the problem. Consumption is weak because people have no income. Employment creation has been weak. So we need to find long-term measures that improve the economy, which boost growth, provide more jobs, then consumption will come back," he said.