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Mutual Fund investments are subject to market risks, read all scheme related documents carefully. DSPAM 2024
DSP
Feb 13, 2025 3 mins
India’s $30 trillion GDP target by 2047 sounds ambitious—but is it realistic? Achieving it requires sustained 8.5% growth, something India hasn’t managed for two consecutive years since 1971. History and data suggest dialing down expectations. Investors, take note: growth, earnings, and returns may not be as high as hoped.
Over the past year, several union ministers anticipated, that India could be a $30 trillion economy by 2047.
But what does the past have to say about the achievability of that target?
For India to reach a GDP of $30 trillion (assuming a stable US Dollar-to-Rupee exchange rate), it will take 25 years at a real growth rate of 8.5% CAGR.
Let’s look at a key consequence of this fact that is of great relevance to investors. Given the RBI’s inflation target of 4%, a real GDP growth rate of 8.5% implies that nominal growth would be close to 12.5% CAGR. Moreover, Indian corporate earnings typically grow slightly slower than long-term nominal GDP growth.
This means that even in the best-case scenario where the GDP grows at 8.5% CAGR and corporate earnings grow at the same rate as long-term nominal GDP growth, the latter will only grow at a rate of 12.5% CAGR.
But here’s the biggest sticking point: it’s incredibly hard to grow the GDP at 8.5% YoY to begin with.
The table below shows that India hasn’t seen two consecutive years of >8% GDP growth since 1971.
Source: NSO, MOSPI; Data as on Jan 2025
And as the size of the GDP increases, maintaining such a high rate will become even more challenging. In fact, except for China, no other country has ever grown at an 8.6% CAGR for 25 years.
A lot would need to go just right for India for its lofty goal to be met. To achieve and maintain high growth, India needs to boost low-skilled manufacturing, increase female labour participation, and avoid protectionist policies — but none of these actions are easy to pull off.
For more actionable insights backed by data and analyses, we invite you to read the latest edition of Netra in its entirety.
This blog is for information purposes only. The recipient of this material should consult an investment /tax advisor before making an investment decision. In this material DSP Asset Managers Pvt. Ltd. (the AMC) has used information that is publicly available, including information developed in-house and is believed to be from reliable sources. The AMC nor any person connected does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Data provided is as of July 2024 (unless otherwise specified) and are subject to change without notice. Past performance may or may not be sustained in the future and should not be used as a basis for comparison with other investments. These figures pertain to performance of the index and do not in any manner indicate the returns/performance of this scheme. The statements contained herein may include statements of future expectations and other forward-looking statements that are based on prevailing market conditions / various other factors and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements.
All content on this blog is the intellectual property of DSPAMC. The User of this Site may download materials, data etc. displayed on the Site for non-commercial or personal use only. Usage of or reference to the content of this page requires proper credit and citation, including linking back to the original post. Unauthorized copying or reproducing content without attribution may result in legal action.. The User undertakes to comply and be bound by all applicable laws and statutory requirements in India.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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Mutual fund investments are subject to market risks, read all scheme related documents carefully. © DSPAM 2024.
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