SBI’s Soumya Kanti Ghosh On India @ 100
#BQConversations | #SBIResearch report predicts India’s 2047 GDP will see a seven-fold jump from current level.
#SBI’s Group Chief Economic Adviser Soumya Kanti Ghosh share highlights of this report. #BQLive
#SBI’s Group Chief Economic Adviser Soumya Kanti Ghosh share highlights of this report. #BQLive
Transcript
00:00 It was unimaginable when I grew up, but chances are that India may actually become a developed
00:05 country by 2047.
00:08 That's what the Prime Minister also focused on in his Independence Day speech.
00:12 There's strong data to suggest that we are on target to meet that goal, but going forward
00:17 will mean having to take the right choices.
00:20 And if we don't take the right choices, we will not get there.
00:23 But beyond the political rhetoric, let's examine the data to back the goal that India will
00:30 be a developed nation by 2047.
00:32 That's what this program is all about.
00:35 We'll be looking at some of this data with the new SBI report and its author.
00:39 Thanks very much, Mr. Ghosh, for being with us.
00:42 Let's just go through some of the data points that you did raise.
00:47 Global per capita income to go up seven times from 2 lakhs now to 14.9 lakhs in the financial
00:54 year 2047.
00:56 But my question is this.
00:59 With a standard rate of inflation of, let's say, 5 percent, what would the actual gain
01:07 be?
01:08 Wouldn't there be a real concern that the value of the rupee as we look at it from today's
01:13 perspective will not be the same in 2047?
01:18 I think, Vishnu, that's a fair question what you asked in terms of inflation, because all
01:22 these numbers are current prices.
01:24 But let me give you some mathematics, some simple assumptions behind the numbers.
01:30 All these numbers are actually based on current growth rate and current inflation.
01:35 So what we are doing is that in 2047, we are assuming that the nominal GDP growth rate
01:40 is around 11 percent.
01:41 And if you look into India's growth in dollar terms, that has been generally for the last
01:45 two decades at around 8.5 to 9 percent.
01:48 So if the rupee, if you take the depreciation of the rupee at 2 percent, which actually
01:53 could reverse, given the fact that India, as India starts gaining in terms of an, in
01:59 March, as a developed economy, the rupee could start appreciating given the percent international
02:03 rupee.
02:04 But taking it otherwise as of now, at 11 percent nominal GDP growth rate with a 6.5 percent
02:11 GDP growth and 4 to 4.5 percent inflation numbers, the total per capita income could
02:19 actually rise to 15 lakhs as per our estimates.
02:23 And one point to note over here is that if you look into the current per capita income
02:27 of India in current prices, which is around 1.91 lakhs.
02:32 And if you look into the overall threshold income of the income tax, which we had estimated
02:37 at 13.3 lakhs, so there is a six times gap.
02:40 So as India marches towards and developed economy, this gap between these income taxpayers,
02:46 which we call the middle income class and the per capita income will also narrow.
02:52 So therefore, in 2047, this gap, which is now six times, could actually based on our
02:58 internal estimates, could half to around three times.
03:02 So that makes this number 15 lakhs, while the tax number is actually around 50 lakhs.
03:07 So basically, it's a very conservative assumption, but it's at current prices.
03:13 Okay.
03:14 A lot of the gains that India stands to make by 2047, when we aspire to be a developed
03:20 nation has to do with more people filing tax returns.
03:24 That's set to go up to 4 percent.
03:27 So how much of this overall estimate of yours is based on fresh receipts coming in from
03:33 income taxpayers who are traditionally been very low in this country?
03:38 See I think if you look into the, I think there's a tax data, if you look into it very
03:42 carefully, we always talk about that the only 5 percent of the Indian population pays taxes,
03:48 but I'll give you a very simple estimates.
03:50 The overall labor force data as per the World Bank is around 530 million.
03:54 Now if you look into the ISHRAM portal, which is basically a portal where unorganized laborers
03:59 are actually registered, that is around 300 million as of today.
04:03 So if I deduct the 300 million from 530 million, total number of formalized labor force should
04:08 come around 230 million.
04:10 And this year, by March 31, as per the income tax data, 68 million has filed returns.
04:17 And if I take the late returns with fine till March 31, 2024, as per the power trades, this
04:23 number could top 85 million to 90 million, around 20 million could more tag pile taxes.
04:29 So this 85 to 90 million as a percentage of 230 million is 37 percent of the formal labor
04:38 force.
04:39 So every one person in a formal labor force is now paying taxes.
04:44 So and the total number of taxpayers have actually tripled from in the last 10 years,
04:50 from 30 million to 90, if I take 90 million.
04:53 There's another very interesting point as well.
04:56 The workforce with a taxable base will increase by 80 percent from 59 percent of the workforce
05:01 now to 78 percent of the workforce.
05:04 So in other words, the overall money coming into people, what they earn will grow up.
05:10 This is a sign and it's linked, you make that link as well of IT fighters leaving a lower
05:16 income strata.
05:17 So India is getting richer is the point that you're mentioning.
05:20 Yes, that's a fact because 13 point, this is exactly the data which is there on the
05:24 income tax website, 13.6 percent of the tax filers have moved from zero tax liability
05:32 to the upper income tax packet, which could be anything beyond five lakhs or so in the
05:37 last 10 years.
05:38 And we are very concentrated, assuming that this number could actually swell to 25 lakhs.
05:43 And if we take the weighted mean income of all income tax filers, the 6.8 crores, that
05:48 number which was 4.4 lakhs 10 years back, today this number is a 13 lakhs.
05:53 So an average middle income person in India today is earning around one lakh a month.
05:59 So in 2047, we are assuming that this number could actually jump to around four lakhs per
06:05 month, which is basically 47 or 48 lakhs.
06:08 So the numbers which are built into this model are conservative.
06:14 And that holds that is based on the current trends with a 6.5 percent growth rate, 4.5
06:20 percent inflation.
06:21 How would we compare in 2047 with other countries which are also doing well?
06:26 I ask this because if our goal is to be a developed nation, what is the number or the
06:31 statistic or the per capita income that we are chasing?
06:35 I think there are various definitions of an developed economy.
06:39 I think the currently the number which is quoted for being in the per capita level of
06:45 economics around this level, I think 12,500 dollars or 13,000 dollars if I assume it correctly.
06:52 But the point which we are raising is that in the future, this number could actually
06:57 go up.
06:58 The only point which I would like to make Vishnu over here is that I think we are assuming
07:05 some type of a linear depreciation of the rupee for the next 25 years, which is unlikely
07:09 to be the case.
07:10 Because as the economy strengthens, as the economy grows in size, the rupee could actually
07:15 also start appreciating.
07:16 So the value of the rupee, which you are assuming that it could be at 115 to 120 by the year
07:21 2047 could be very well lower than that.
07:25 And every 1% appreciation the rupee value will actually add to an higher per capita
07:30 income also in dollar terms.
07:33 So therefore, from that point of view, I think it is possible that India could achieve the
07:38 economic tech earlier than what is getting projected if we get our numbers and that's
07:42 correct.
07:43 So before 2047, that is interesting if that prediction does become clear.
07:49 Thanks very much, Mr. Ghosh.
07:50 Fascinating report.
07:51 Thank you.
07:58 Thank you.