Why India can be a developed country by 2047

In his 2022 Independence Day speech, PM Modi outlined an ambitious (some might say even outlandish) goal for India in 2047 – the status of a developed country. Soon after, economists and other experts started to estimate the “realism” of this ambition. We do the same in this article via a two-stage discussion – definition and estimation of realism. DefinitionWhether one is a developed country or not is a matter of definition. The go-to sources for answers to this basic question are World Bank, IMF, UN etc.There is a complete blank there and for a very good reason.The post-World War II period can correctly be described as the era of development – more accurately as the era of removal of absolute poverty.World Bank’s defining dream is of a world “free of poverty”.Hence, most of the concentration (make it all) of experts, economists has been on the subject of definition and estimation of absolute poverty.Different poverty lines have been defined for a range of countries (poor, middle income, rich) and the corresponding poor population estimated.Consequently, we have a near zero literature on the level of income associated with a “developed country”.The next go-to source is Wikipedia. It defines a developed economy in vague terms as a country with a high quality of life, and advanced technological infrastructure.It helpfully adds that this is with reference to “other less industrialised nations”.Perhaps ChatGPT will offer a good definition. Whatever the definition, we know that it cannot be the size of the economy, nor can it be in dollar terms. Estimates of GDP in current dollars are particularly inaccurate. Hence “forecasts” of whether India will be a $20 trillion, or $30 trillion or $40 trillion economy in 2047 are completely off the mark with regard to developed country status. World Bank has a current dollar income classification of $12,500 per capita for rich countries. This yields 56 nations as developed in 2021, population of 1,165 million. In pre-pandemic 2019, there were 63 rich countries, population 1,210 million. Maybe World Bank and Oxfam should note that 45 million people became not-developed in 2021 because of the pandemic (a number interestingly close to the number of people who became poor because of the pandemic). medium nocaption98067774 So, what should the definition be? If we go by quality of life, it must incorporate the constituents of freedom, political and economic, ie democracy and openness, health, education – and per capita income. Income must be measured in constant per capita PPP (purchasing power parity). Per capita because else the richest country in the world, Luxembourg, will appear very poor. Neither can we use dollar terms because suddenly Japan will appear as 35% less rich than a year or so earlier. The choice for the measuring rod is clear – per capita constant PPP. Further, and importantly, growth rates in constant local currency are equivalent to those obtained in constant PPP. Even per capita PPP income is an inadequate indicator – several oil countries became rich (not developed!) when the price of oil increased eight times in the 1970s. But all is not lost. As has been well-noted and researched, that while there is variation, the correlation of living standards (and democracy) with per capita income is high, and strong, and especially so for rich Western economies, ie, democratic developed countries have broadly similar, and high, levels of health and education. Measurement Fortunately, there is one country that was previously very poor, and in 1996 was classified as a developed economy. In 1996, a rich country organisation, OECD, invited an erstwhile developing country, South Korea, to join the exclusive all-white (except for Japan) developed economy club. Was this a worthy, and correct, choice? It appears so. Per capita income, in 2011 prices, in 1996 in Korea was PPP $17,810. The advanced country with the lowest per capita GDP in that year was Greece – PPP $21,652, about 21% higher. But note that the mean education level in Korea was 11.2 years, about 1.6 years higher than Greece, in 1996.This global background to advanced country status and definition allows us to rigorously examine PM Modi’s forecast of India being a developed country in 2047.In 2021-22, India’s per capita income was PPP $6,067, about a third of a developed country’s level of PPP $18,000.The “target” per capita growth rate for India to achieve over the next 26 years is 4.1% per annum.How realistic is this target?The table provides estimates of GDP growth for several time-periods starting with 1991.The average per capita income growth rate for the 28 years, 1991-2019, was 4.5%.This first cut estimate for the next 26 years fits with the expectation. The period 2014-19 is often singled out for slow Indian growth. Note that no matter what the classification of countries, this period was the minimum. Note also that this period was the only period when per capita growth in India was higher than East Asia (excluding China). And this out-performance increases to a high 1.2% per annum for the period 2021-27. Therefore, the reasonable conclusion is that the developed country status in 2047 is very attainable – and realistic. The writer is former Executive Director, IMF