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D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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Is it $10 trillion or $27 trillion by 2034?

Posted by Muthu on November 25, 2014

For last 2 days, there have been many articles based on PwC report that India would become a $10 trillion economy in 2034.

In 2001, India was a $500 billion economy.

In 2007, India became a trillion dollar economy.

It is likely to end this financial year as $2 trillion economy.

Since we measure in USD, not only our growth rate, but the exchange rate also would play a role in measurement of GDP or size of the economy.

1 USD was around Rs.46 in 2001. It gained as much as 1 USD= Rs.39 in 2007.

Now it is around Rs.62 per USD.

PwC’s estimate of $10 trillion in 2034 looks very low to me.

PwC itself has projected a growth rate of 9% for next 20 years. This is real GDP growth rate. Assuming an inflation of 5%, the nominal growth rate works out to 14%. GDP is always measured only in nominal terms.

Assuming the exchange rate as constant, at 14% growth rate, $2 trillion economy would become a $27 trillion economy in 2034.

Exchange rate would not be constant during the above period. But I don’t know how to even guesstimate what would be the exchange rate in 2034.

Why I’m writing this piece and posting is that I find the PwC number incorrect. At the same time, I also feel an organisation like them would have definitely worked out the above assumptions and calculations.

I would be grateful if anyone can clarify on the above.

One Response to “Is it $10 trillion or $27 trillion by 2034?”

  1. west_canal said

    “Assuming an inflation of 5%”
    “But I don’t know how to even guesstimate what would be the exchange rate in 2034”

    I find your too statements pretty funny.
    Well if you can guess India’s inflation why can’t you do it for US too. Currency depreciation roughly tracks interest differential b/w too countries. By 2034, INR(going by historical base rate) should depreciate to 100 /USD or maybe even more.

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