Why in news?

At the Berlin Global Dialogue, Commerce and Industry Minister Piyush Goyal asserted that India will be a $30 trillion economy within 20–25 years, shaping how the country negotiates trade deals.

Goyal argued that while the US economy is currently eight times larger, the gap will narrow significantly over the next 25 years. His statement underlines India’s growing economic confidence and its aim to negotiate trade agreements from a position of strength, aligned with its long-term growth trajectory.

What’s in Today’s Article?

• Understanding the Size of an Economy
• How a Country’s GDP Is Used For Comparison?
• Assessing the Validity of $30 Trillion Projection
• Why $30 Trillion Target Faces Challenges
• The Real Impact of a Slower Growth Rate
• India Must Sustain Higher Growth to Realize Its $30 Trillion Vision

Understanding the Size of an Economy

• The size of an economy is measured by its Gross Domestic Product (GDP) — the total market value of all goods and services produced within a country in a year.
• GDP reflects a nation’s economic strength and global influence, much like a scoreboard that tracks overall performance. A larger GDP indicates greater production, spending, and prosperity.
• As of end-2024, the US GDP stood at $29.2 trillion, while India’s GDP in the 2023–24 financial year was $3.9 trillion.
  • To compare, the US state of California alone had a GDP of $4.1 trillion.
• An easy analogy: GDP is like the total runs scored by a cricket team over a season — the higher the runs (output), the stronger and more successful the team (economy).

How a Country’s GDP Is Used For Comparison?

• Globally, GDP is expressed in US dollar terms to allow easy comparison between countries.
• To calculate this, a nation’s GDP in local currency (rupees, in India’s case) is divided by the rupee–dollar exchange rate.
• The GDP discussed internationally is usually the nominal GDP, which includes the effect of inflation — unlike real GDP, which adjusts for it.
• Projecting future GDP, therefore, depends on two factors:
  • India’s nominal GDP in rupees, and
  • The rupee–dollar exchange rate.
• For example, India’s GDP in 2024 was about Rs 330 trillion. If the exchange rate had remained ₹65 per US dollar (as in 2014), India would have been a $5 trillion economy.
• However, since the rate weakened to ₹84 per dollar, the GDP in dollar terms was only $3.9 trillion.

Assessing the Validity of $30 Trillion Projection

• The Minister’s projection of India becoming a $30 trillion economy in the next 25 years appears realistic, based on past trends.
• Looking back, from 2000 to 2024, India’s nominal GDP grew at a compounded annual growth rate (CAGR) of 11.9%, while the rupee depreciated against the US dollar at a CAGR of 2.7%.
• If India maintains the same growth and currency depreciation rates over the next 25 years, its GDP would surpass $30 trillion by 2048 — around 27 years from now, which aligns closely with Goyal’s prediction.

Why $30 Trillion Target Faces Challenges?

• While projecting future growth using past trends seems reasonable, India’s economic momentum has slowed since 2014.
• Over the past 11 years, India’s nominal GDP has grown at a CAGR of 10.3%, lower than the 11.9% average of the previous 25 years.
• Meanwhile, the rupee’s depreciation has slightly accelerated to 3.08%, compared to 2.7% earlier.
• This means slower economic growth combined with faster currency weakening.
• If these recent trends continue, India’s GDP would reach $30 trillion only around 2055, not by 2048, pushing Goyal’s target back by nearly a decade.

The Real Impact of a Slower Growth Rate

• The timeline difference between India reaching a $30 trillion economy by 2048 or 2055 may appear small — just 7 to 8 years — but the financial impact is huge.
• If India continues growing at the pace of the past 25 years, by 2055 its economy would be 75% larger than what it would be if it grew at the slower rate of the past 11 years.
• In short, even a slight dip in growth momentum over time can lead to massive differences in economic size when projected over decades.

India Must Sustain Higher Growth to Realize Its $30 Trillion Vision

• The analysis shows that each decade’s performance matters — even small changes in growth rates can cause huge long-term differences in economic size.
• Although it’s normal for growth to slow as economies mature, India is still relatively small compared to the US and China and cannot afford a slowdown yet.
• To make the $30 trillion goal credible, India must accelerate its growth rate and maintain strong, consistent economic momentum over the coming decades.