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January 06, 2013

Updating predictions of India's Future Economy

Nextbigfuture last forecasted the Indian Economy out to 2030 in 2011. India's 2012 GDP growth ending up being about 5.5% instead of 8 or 9%.

Back in 2011 I thought that India would be able to maintain 9% GDP growth out to 2030. This was mainly based on India have a young population, early development stage and economic performance of 2003 to 2010.

2003 8.3%
2004 6.2%
2005 8.4%
2006 9.2%
2007 9.0%
2008 7.4%
2009 7.4%
2010 10.4%
2011 7.2%
2012 5.5%

I thought that the Indian currency would slowly strengthen but instead it weakened by over 20%.

India's rupee to US dollar conversion is now 54.3 indian rupees to US one dollar. The Indian currency has weakened from the 44 to 1 US dollar level it was at in 2010 to early 2011.

I am now expecting India to average about 6% GDP growth and an occasional year with 8-9% GDP growth from now to 2030. I expect the currency to stay relatively weak.

India’s current account deficit widened to 5.4 per cent of GDP in 2012

India's inflation has persisted between 7-11 per cent for a little more than three years now.

Manufacturing is yet to show signs of a revival and only marginal agricultural growth is foreseen, chances of India’s economy expanding at faster than 6 per cent in 2013-14 are narrow, analysts say.

With Reforms and effective policy India could have 8-9% GDP growth

India should be able to achieve a growth rate of 8 per cent if it manages to maintain a savings rate of 35-37 per cent of gross domestic product (GDP), said Rakesh Mohan,
executive director, International Monetary Fund. “If we want to have an impact on the people’s welfare in the grassroots level, you need to have these kind of growth rates (8 per cent). With incremental capital output ratio of 4-4.5 per cent and an investment rate of more than 35 per cent, achieving a sustained growth rate of 8 per cent-plus is not difficult,” Mohan said.

India is underperforming because of financial problems and lingering issues of lack of education, corruption, poor infrastructure and other issues.



I think India will be in the 4-6.5% GDP growth range for 2013 through 2017.
I think India will be in the 5-8% GDP growth range in the 2018-2030 timeframe.


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