Sanjeev Sanyal – India Surpasses Japan To Become 4th Largest Economy | Indian Economy #brasstacks

Sanjeev Sanyal – India Surpasses Japan To Become 4th Largest Economy | Indian Economy #brasstacks

India has now surpassed Japan to become the world’s fourth largest economy citing data from the International Monetary Fund. Uh the Niti Aayok CEO has shared this development over the weekend. With the economy now valued at over $4 trillion, India trails just the United States, China and Germany to now become the fourth largest economy in the world. According to the April 2025 edition of the IMF’s World Economic Outlook, the Indian economy is expected to grow by 6.2% 2% in 2025 and 6.3% in 2026 that maintains a solid lead over all other regional peers certainly and also now the expectation is that India will surpass Germany which is the third largest economy in the world uh in the next couple of years to become the third largest economy globally. Joining me now is Dr. Sanjiv Sanal economist and member of the prime minister’s economic advisory council. Thank you very much. First of all, many congratulations. India now the fourth largest economy officially as per the IMF’s outlook that came out over the weekend. Uh what is fascinating though is the is the speed at which it has happened. Every trillion the first trillion got crossed in 2007. The second trillion took another 7 years uh from 2007 to 2014. Then the next trillion from 2014 to 2021. But the last trillion that is from 3 trillion to 4 trillion has gone in just uh the last four years. uh what would you attribute this faster pace of growth to so much so India is now the fourth largest economy in the world? Well, welcome to the joys of compounding. Um so um you know as with any kind of compounding uh it it is the result of now some 35 odd years of sustained growth. But what is interesting is that since in the in the postco period uh India has not only grown at a consistent pace but by a very large margin uh over uh other large economies. So uh growing at somewhere in the 6 to 7% range consistently when uh many countries most countries in the world are struggling to even manage uh 2 3% growth. In fact countries like Japan or Germany are barely growing at all. So this is a situation where clearly this compounding process is now really flicking into our favor and we are able to generate these kinds of uh uh you know expansions. But Mr. Sel you know one thing of course is that uh you know we’re number four now and if we continue in the same trajectory 6% plus growth over the next couple of years the expectation is that India would surpass Germany by the middle of 2027. Uh Germany is currently growing at under 1%. India is growing at over 6%. But it also comes at a time of intense you know economic uncertainty particularly on the trade front. You’ve seen the Trump tariffs etc. What do you reckon are the headwinds between now and let’s say 2027 when India is expected to surpass uh Germany that could be an impediment in this fast rate of growth? Well uh there are two parts to this. Um when you’re talking about international headwinds do remember uh this is about relative performance. when you’re talking about rankings of economies. So if it’s hurting us, it’s also hurting Germany. So from that limited perspective, international headwinds don’t really matter because you know both Germany and India face it. So uh we we are growing at 6%, they are growing at less than 1%. So in that sense uh you know in about 18 months to 24 months we will surpass them. But in absolute terms this is an issue. um we are uh you know growing at somewhere in the 6 12% range but of course uh despite the fact that we are the world’s fourth largest economy now in per capita terms we are still quite poor so we would like to grow even faster than this perhaps over 7% a year but it’s difficult to do this in under these circumstances so you know if in in purely from a you know a ranking perspective it might not might not matter but in terms of you know vixed bharat and our our ambition of becoming a developed country over the next quarter of a century. Uh this uncertainty does matter. So, so what what needs to be done to uh to amp up that per capita income growth? Because India is currently about $2,500 per capita. China is probably five times more than that, more than $10,000 per capita. Uh and and in a big country with a young population, a large young population, how do you how do you you know amp up that particular parameter? So first of all, we are no longer at 2,500. We are we are now somewhere around $3,000 uh uh dollars per capita income, which is still low. U and you know there too this compounding process will will matter. So of course u you know I point out to them that in order to have higher per capita GDP, you need to have larger GDP. So uh this growth that we just talked about is important but we need to speed it up and we will be doing this this sustaining this growth at a time where the external environment may not be as conducive as was the case during China’s high growth phase. Uh there are many things that we therefore consequently need to do in terms of being flexible about the new environment. Uh one of them is that we need to build quickly on bilateral trade deals. Uh because uh if we do want our export sector to add to our growth then we need to you know adapt. So as you know we have now recently done a free trade agreement with the the UK. Uh we are in advanced discussions on free trade uh uh with the US as well as with the European Union. Um and of course we already have existing ones with Australia, Japan, uh the UAE and so on. So we are building up a network of bilateral free trade agreements in order to be able to keep uh our export markets open. So that’s one big area. The second big thing is to keep our domestic growth uh uh momentum going and there of course uh many important things have be happened in in in the last few years. uh one is that uh we have managed to bring inflation uh into a reasonable range of two to two to six% uh with the inflation targeting and in fact right now inflation is running at only 3%. So that gives us a degree of freedom to bring down our cost of capital in the long to medium run. Uh so that is something very very important because once you brought down the cost of capital that’s important. Secondly, while you you know there are always complaints about improving the GST, but the fact is uh GST is a huge innovation in terms of having united our market. Uh you can always improve this system but it was a massive jump from what used to exist before that when we weren’t even ai unified market. So that was another big thing. But let me say that we need to keep doing more reforms forward both to the GST and other things. but a myriad number of these process reforms that we need to keep doing. So whether it is ease of doing business, ease of doing ease of living uh and um yeah and so on and so forth and of course we need to be open to international capital where you know we want the world’s uh uh companies to come here and invest uh we want to become a part of the global supply chain. Uh we want new technologies. So all of this needs to be done and so this is not something you know it’s about doing one set of big reforms. It’s a continuous process and we have to be at it. Uh one final word and there was a bit of a political controversy over the weekend with Mr. Jaram Romesh of the Congress party tweeting uh that net FDI inflows have plunged. He is citing some data to show that it’s plunged by almost 100% down to less than a billion. Of course the BJP has rebutted that by saying you’re confusing between net FDI and gross FDI. Uh but how would you react to that? There is also politics over this. You know, is India growing fast enough? Is it growing fast enough to add 10 million or 15 million jobs every year? That this growth has not percolated uh down to the people who who actually deserve it. So I don’t want to get into the politics of it, but I can respond to the facts. Uh it is true that um the gross FDI is doing well. It is also true that net FDI has fallen. So both of those facts are true. Uh so let me explain what they are. So basically what is happening a lot more money is coming into India’s FDI in a gross terms. I companies around the world are coming here investing. There’s some 80 billion plus worth of FDI that came into India making you know what one of the best years ever was the last financial year. At the same time do remember that there’s a stock of past FDI which means that uh there are foreign companies that have investments here. they are getting returns from that investment which they may be taking and repatriating. So both of those processes is happening. What do we want as a policy maker? Well, I want that gross FDI to keep growing and I also want that existing in investors retain their money here in India rather than repatriate it. Now both of these require that we keep investing in reforms here in India to make it as attractive as possible not just for new investors but we want the old investors to retain their uh resources here because they see this is being the fastest growing uh sort of source of returns for them. So both of these need to be uh managed uh um and so that is the reason I said reforms have to be continuously done. As far as percolation of the um of growth to the rest of the country, let me say that while in general the western half of India has done much better than the eastern half of India. I’m not a I’m not a proponent of the north south divide. Actually the divide in India in economic terms is east west. And in this case, let me say that the best way for percolation to happen is for India to invest in big physical infrastructure in eastern India. And you’re beginning to see that you’re beginning to see this highways u uh electricity supply all kinds of things that were problem in eastern part of the country now being invested in northeast as well. Uh you know who would have imagined the chip manufacturing would be coming up in Gojhati of all places around. So we are beginning to take the eastern half of India seriously and you are beginning to see some growth there as well as a result. All right, Mr. Sanji Saniel, thank you very much for joining us here on CNN News8 with your thoughts and perspective. Thank you for your time.

India has officially become the world’s fourth largest economy, surpassing Japan, with a valuation of over $4 trillion. The IMF projects a growth rate of 6.2% in 2025, positioning India to potentially overtake Germany by 2027 amidst global economic challenges.

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Economist Sanjeev Sanyal shares his perspective

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