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

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$2 trillion to $20 trillion

Posted by Muthu on January 17, 2015

We are a $2 trillion economy now, which means our GDP is $2 trillion. Prime Minister has mentioned yesterday that we should aim to be a $20 trillion economy. Though this is an ambitious target; it is very much in the realm of possibility.

This government has been taking all right steps with regards to reforms, fiscal discipline and over all well being of the economy. They are smart enough to use the opportunities provided by lower crude price for repairing the country’s balance sheet, clear the fiscal mess created by legacy issues and overall management of country’s finances.

By the time Modi’s first term ends, I would not be surprised if we achieve a GDP growth rate of 10%. Assuming an inflation of 6%, our country’s nominal growth rate would be around 16%. For next few years, we can expect a nominal growth rate of 14%.

At the above rates, in next 15+ years (around 2030), we should be a $20 trilion economy. High growth rate for 2 decades is definitely possible. If China has achieved it in the past, we can definitely do it in the future. In the global growth scenario, next 2 decades is the time of India; a golden period for our economy.

Due to lower crude prices, we may even be heading for a current account surplus in the near future. This is a big positive. So do not be surprised if rupee appreciates. Someone has shared in a Tweet that Prasanth Jain in a presentation yesterday has said that he expects rupee to appreciate even to the levels of 55 per dollar in the second half of this year or so.

In the long run, rupee would depreciate to the extent of inflation differential between us and USA. Assuming US has a long term inflation of 3% and ours is 6%, we can expect rupee to deprecate around 3% on an annualised basis.

Even accounting for this, in next 15 to 20 years, we should be a $20 trillion economy.

If our economy grow at this rate, it would not come as a surprise; Rakesh Jhunjhunwala’s prediction of Nifty multiplying 15 times in next 15 years coming true; which is annualised return of 20%; 3% more than our past long term growth rate of our markets.

If you don’t fear corrections, steep falls and occasional bursts and stay with patience; you would get very wealthy out of India’s and hence Indian markets growth.

Things are falling in place for our country and our time has come. Let us participate in the $2 trillion to $20 trillion journey.

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