Thread by @GorwayGlobal

A short tweet thread about #5Trillion Dollar GDP
It was back in 2019, not long after the General Election win, that the Prime Minister set India a target for India to grow to become a USD 5 TRillion GDP by 2024. i.e in 5 years time.reuters.com/article/us-bri…

Under the headline, "Modi says wants to make India a $5 trillion economy by 2024", @Reuters reported that
"India’s Prime Minister Narendra Modi said that his country aims to be a $5 trillion economy by 2024, in remarks to leaders at a BRICS summit on Wednesday [Nov 13].

Here is the official press release that contained the Prime Minister's remarks:
"By 2024, we want to make India a five trillion dollar economy. The infrastructure alone requires $ 1.5 trillion investment."
pib.gov.in/PressReleseDet…

In 2018, India's GDP was, according to RBI's excellent Database of Indian Economy,
(A) at constant 2011-12 prices: 139.9 Lakh Crores
(B) at current prices: 188.99 Lakh crores.
In dollars, applying a Fx frate of 68.14 for 2018 prices and 46.6 for 2011-12. I get

GDP in US Dollars
A) at constant prices: = 139.9 Lakh crores / 46.6 = 2.99 Trillion USD
B) at current prices: = 188.99 LC/ 68.14 = 2.77 trillion dollars.
Source lof these Fx frates: exchangerates.org.uk/USD-INR-spot-e…

Be that as it may, the starting point for the race towards a #5Trillion Dollar economy was around 2.77 to 3 Trillion dollars. Lets assume the latter figure it makes the target easier to reach. What growth rate would we need to achieve this?

To grow from 3 to 5 Trillion dollars in 6 years would need a steady growth rate of 8.89% p.a. each year for 6 years. Any sliding in one year would need a spurt in the next to make up.

That steady growth rate in real terms of 8.89% each year for 6 years would be impressive indeed. So what was the track record in the years 2014-154 to 2018-19.?
Again the RBI's database of Indian economy gives us some reliable data. The numbers are:

At current prices (in Lakh crores, or trillion rupees)
2015-16 : 137. 7
2016-17 : 153. 9
2017-18 : 170.9
2018-19: 188.99

That implies a nominal growth rate of
2016-17: 11.7%
2017-18: 11.03%
2018-19: 10.5%

But at constant (2011-12 prices the figures are somewhat different - again in Lakh crores
2015-16 : 113.7
2016-17 : 123.08
2017-18 : 131.44
2018-19: 139.92
giving growth rates of
2016-17: 8.26%
2017-18: 6.80%
2018-19: 6.45%

So if the #5Trillion was to be achived in real terms i.e not numbers 'inflated' by inflation then the real growth rates would have to be meaured on constant prices. As the figures show the growth between 2016-17 and 2018-19 was declining and well below the 8.9% needed.

Indeed as later experience showed, if you track the RBI's numbers to 2021-22, this is what the growth rate actually did: (see picture)

In terms of the actual GDP in each of those years the movement looks like this: So in 2021-22 we were effectively back where we were 3 years earlier. The growth rate was declining year on year for 4 years and then Covid hit, hard

The point is that even in late 2019 when the 2024 target of #5Trillion was floated, it was obvious that the direction would have to change . Thaty didn't happen. And it became even more obv as time went on that it would not be reached . And so in 2023 the rhetoric changed.

In the Republic Summit of 26 April 2023, the Prime Minister said, see the press release here: pib.gov.in/PressReleasePa…
He said, and I quote, "It took almost 60 years for India to become a one trillion dollar economy. Sixty years!

"By 2014, we somehow managed to reach the two trillion dollar mark. That is a two trillion dollar economy in seven decades! But today, India is a country with an economy of about 3.5 trillion dollars in just nine years of the formation of our government."

The assembled crowd gasped in awe and amzement. But that was because neither they nor Mr Deepak Balga (who, as head of Invest India, said something similar), understood that it was nothing more than algebra at work.

To grasp that point you will have to read my tweet thread here:

https://twitter.com/GorwayGlobal/status/1628142209701711873?s=20

Recap. The PM said,
It took us 60 years to reach 1 Trillion. We reached "2 trillion in seven decades! But today, India is a country with an economy of about 3.5 trillion dollars in just nine years of the formation of our government."

Taking those numbers as fact, India's GDP was
1 trillion in 2004
2 trillion in 2014
3.5 trillion in 2023
So the growth in the decade 2004-2014 must have been at an average annual rate (CAGR) of:
2^(1/10) - 1 = 7.1% p.a.
And in the 9 years since:
(3.5/2)^(1/9) -1 = 5.75%

Looked at in terms of rate of growth, and taking the Prime Minister's numbers at face value, the growth in the 20014-2023 period was slower than in previous decade. BUT because of the algebra of compund growth. the absolute addition in more recent years looks like..Wow!

That's algebra for you. It's the mathematics of exponential growth. As an illustration, Chine grew by just 4.5% in 2022, but because its GDP was 18.7 Trillion in 2021, that 4.5% growth added a whopping 840 billion to its GDP (a quarter of India's total GDP!!)