In its monthly review report, India’s Finance Ministry has projected India’s economic trajectory to potentially reach $7 trillion by 2030. According to data presented in Indian Economy – A Review, on January 29, ahead of the Interim Budget, India has managed to achieve strong growth for a third consecutive year, surpassing a 7 per cent expansion. The strength of domestic demand, expanding private consumption and investments, and structural reforms, have driven the economy to a 7 per cent plus growth rate in the last three years, the report said. The economy grew 7.2 per cent in 2022-23 and 8.7 per cent in 2021-22.

Even as the finance ministry expects FY24 economic growth to exceed the central bank’s projection of 7 per cent, it expects growth in the following year, FY25, to be close to 7 per cent. However, geopolitical risks could lead to supply chain disruptions and a rise in inflation. The ministry’s latest monthly economic review also said that under reasonable assumptions, India can aspire to become a $7 trillion economy by 2030, adding that in the next three years, the country is expected to become a $5 trillion economy, the third largest in the world, and the government has set a higher goal of becoming a “developed country by 2047.”

“India’s unwavering commitment to ensuring steady economic growth is generating resources for investment needed for climate change adaptation, building resilience, and mitigating emissions,’ the review read.

Experts agreed that 7 per cent growth in FY25 is achievable. “A growth target of over 7 per cent for FY25 is possible if the government can prevent the depreciation of the rupee,” said Pronab Sen, an economist and former chief statistician of India. “At the moment, the exchange rate is stable with imports being low. But what happens when imports rise? Also, consumption, especially rural consumption, has to improve.”

The ministry also said reforms will be more purposeful and fruitful with the full participation of state governments. Public sector capital investment has surged in the past decade and the financial sector has remained healthy. According to the review, priority areas for future reforms include skilling, learning outcomes, health, energy security, a reduction in the compliance burden for small businesses and gender balancing in the labour force.

However, while India has witnessed robust growth, the tightening of interest rates in the West, driven by continuous inflation, has resulted in a slowdown in business, investment and trade. Besides, the conflicts in Ukraine and Israel have threatened commodity shortages, driving up energy prices and intensifying inflationary pressures.

“The global economy is struggling to maintain its recovery post-covid because successive shocks have buffeted it. Some of them, such as supply chain disruptions, have returned in 2024,” the report said. “If they persist, they will impact trade flows, transportation costs, economic output and inflation worldwide. India will not be exempt from it, but having faced and seen off covid and the energy and commodity price shocks of 2022, India is quietly confident of weathering the emerging disturbances,” it added.

The growth estimates for FY25 come days before the Narendra Modi-led central government will present its final budget for the current term before the country heads to a general election this summer. As things stand, India is expected to remain the fastest-growing major global economy. According to S&P Global, India is on track to become the world’s third-largest economy by 2030, overtaking Japan and Germany.