RBI Deputy Governor Patra Envisions India As World's Second-Largest Economy By 2031

Patra also indicated that the RBI forecasts average inflation to be 4.5 per cent for the fiscal year 2024-25 and 4.1 per cent for 2025-26.

Reserve Bank of India (RBI) Deputy Governor Michael Debabrata Patra suggested that India has the potential to achieve the status of the world’s second-largest economy by 2031 and potentially the largest by 2060, leveraging its inherent strengths. Speaking at the Lal Bahadur Shastri National Academy of Administration in Mussoorie, he emphasised that maintaining price stability is crucial for monetary policy to lay a solid foundation for sustained long-term growth.

“Given the innate strengths… it is possible to imagine India striking out into the next decade to become the second largest economy in the world, not by 2048, but by 2031, and the largest economy of the world by 2060,” he said.

 “The formation of inflation in India needs to be navigated towards convergence with global inflation so that both the internal and external value of the rupee is preserved. This will prepare the ground for the internationalisation of the rupee and the emergence of India as the economic powerhouse of the world of tomorrow,” he said in a speech uploaded on the RBI website on Friday.

Patra also indicated that the RBI forecasts average inflation to be 4.5 per cent for the fiscal year 2024-25 and 4.1 per cent for 2025-26.

“Monetary policy should be conducted in terms of some rule-like behaviour that binds it to pursue its goals across time. Instead, if it falls prey to the temptation of exploiting short-run trade-offs – like abandoning inflation control in the short run and boosting growth or what economists call time inconsistency – it will ultimately lose sight of its objective because, in the short-run pursuit of growth, inflation may be allowed to rise to levels that can be inimically harmful to growth,” he said.

Patra noted a shift in Indian households' savings behaviour from financial savings to physical savings, often supported by loans. Over the period from 2021 to 2023, the gross domestic saving rate averaged 30.7 per cent of gross national disposable income. He highlighted that, unlike many countries, India's growth does not heavily rely on foreign resources, which play a minor and supplementary role in its economic progress.

Patra emphasised the need for India to enhance its efforts to boost exports of goods and services. Currently standing at $768 billion, representing 2.4 per cent of the global total, he suggested elevating these figures to $1 trillion each for merchandise and services by 2030, accounting for 5 per cent of the worldwide total.

Patra stressed the necessity of elevating India's manufacturing sector to position it as a global hub, advocating for a growth rate target of 10 per cent. Achieving this ambitious goal, he asserted, would elevate the manufacturing sector's share in gross value added to 25 per cent, thereby creating substantial linkages with other economic sectors.

He underscored that embracing the Fourth Industrial Revolution is pivotal to this transformation. This revolution integrates automation, data exchange, cyber-physical systems, the Internet of Things, cloud computing, cognitive computing, and advanced robotics to establish smart factories. Patra also highlighted the critical importance of developing a skilled labour force to enable India's success as a manufacturing powerhouse.