Will India be a $5-tn economy by 2025? Netizens do the math after 'impossible' comment by Raghuram Rajan

Former RBI Governor Raghuram Rajan's recent comment that it is nearly impossible for India to become a $5 trillion economy by 2025 has sparked a fierce debate on social media, with many backing the economist based on India's current GDP growth and future projections. 

"We are now maybe a $ 3.5 trillion economy, to be a $5 trillion economy, you have to grow at 12 to 15 per cent real growth rate over the next two years," Rajan, presently Katherine Dusak Miller Distinguished Service Professor of Finance at Chicago Booth (USA), said in an interview with news agency PTI.

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India is projected to grow at 6.3 per cent in FY 2023-24, but it will be slightly less in the next financial year. The central government had set up a target to become a $5 trillion economy but many financial institutions have predicted that this target may be achieved by 2027.

Raghuram Rajan said that the people can not simply pull numbers out of a hat and say India will be a $5 trillion economy by 2025. He was of the view that it was nearly impossible for India to become a $5 trillion economy by 2025.

The economist, who served as RBI Governor from 2013 to 2016, immediately came under fire as some of his predictions, in the past, about the economy did not quite turn out right. For instance, in an informal chat with Rahul Gandhi during Bharat Jodo Yatra in December 2022, Rajan said that the Indian economy would be lucky to see 5 per cent growth in 2023. But India grew at 7.8 per cent in Q1 and 7.6 per cent in Q2, beating all the estimates.  

However, some people backed Rajan, saying he is right on this one as the current growth rate may not be sufficient to achieve a $5 trillion economy by 2025. "He (Rajan) is right in this, though," said Shailendra Malik, a social media user. He said reaching $5 trillion by the end of 2025 means India needs to clock 11 per cent GDP growth in 2024 and 2025. "This is not realistic, indeed, if we are ending the current year at $4.12 trillion."

However, another social media user shot back and said: "That's 11% nominal growth, right? 7% real growth should get us there, isn't it?" 

Malik responded negatively and said the country needs 9.5 per cent real GDP growth to get the nominal around 11 per cent. He said the International Monetary Fund (IMF) has pegged India to grow between 6-7 per cent.

Rohit Girdhar, who worked with GE and went to Stanford, said India would be at $4 trillion at the end of 2023. "There is definitely a possibility to hit $5Trn by the end '25. Probably also surpassing Japan and Germany to be the #3 economy."

But another user said that India would need to grow by 16 per cent to reach $5 trillion by 2025. "Do the maths and find the GDP growth rate needed to go from 3.73 to 5 in 2 years. It's about 16%. When has India had that growth rate? Don't be too nationalistic (foolish), please. Even with 4 to 5, it needs 12%. BITSP, Stanford all in vain."

Akanksha Ojha, a biotech engineer-turned-banker, also jumped into the conversation and said if one looks at the numbers in the last 30 years, India's GDP in dollar terms had grown at an annual average rate of 9 per cent. "That's a very healthy growth rate given that the rupee has depreciated these years against the US dollar," she said in a series of posts on X. "So, India can definitely grow to be the third-largest economy in the world by 2025, with a potential GDP of $5 trillion."

In November this year, American investment bank Morgan Stanley said that India was on track to become the world's third-largest economy by 2027, surpassing Japan and Germany, and have the third-largest stock market by 2030. "We believe India is set to surpass Japan and Germany to become the world’s third-largest economy by 2027 and will have the third-largest stock market by the end of this decade," said Ridham Desai, Morgan Stanley's Chief Equity Strategist for India.