Economists Warn 6.5 Percent GDP Growth Insufficient to Elevate India to Developed Status

While India’s headline gross domestic product growth remains among the strongest globally, economists warn that the current trajectory may not be sufficient to lift the country out of the lower-middle-income bracket. Speaking at the ET Alpha Wealth Summit, a panel of leading economists debated whether a sustainable growth rate of 6.5% to 7% is enough to achieve the government’s vision of ‘Viksit Bharat’ (Developed India) by 2047. The consensus among the experts suggests that while 6.5% represents steady compounding, it falls short of the transformative growth required to significantly boost per capita income and household wealth.

Garima Kapoor of Elara Securities emphasized that achieving developed nation status requires a durable real growth rate of 7.5% to 8%. The distinction is critical: at 6.5%, the economy incrementalizes, but at 8%, it undergoes a structural transformation. Dr. Aurodeep Nandi of Nomura highlighted a stark comparison with China. Thirty years ago, both nations shared similar per capita incomes. Today, India’s per capita income hovers between USD 2,500 and USD 2,600, keeping it classified as a lower-middle-income country, whereas China has progressed to approximately USD 14,000, on the verge of escaping the middle-income trap entirely.

A primary structural hurdle identified by the panel is the prolonged absence of private corporate investment. Despite robust corporate balance sheets, low debt-to-equity ratios averaging 0.45, and favorable credit ratings, domestic companies remain hesitant to deploy capital. Dharmakirti Joshi of CRISIL noted that while firms possess the capacity to invest, they lack the willingness. Boardrooms are constrained by post-pandemic uncertainty, global competition from low-cost Chinese industrial imports, and a cautious approach toward leverage under current bankruptcy frameworks. Furthermore, policy incentives like the 2019 corporate tax cuts and aggressive public infrastructure spending have yet to effectively crowd in private capital.

Although capital is flowing into newer sectors such as electric vehicles, data centers, and renewable energy, these industries are highly capital-intensive and do not generate the volume of employment needed to elevate mass consumer demand. This lack of job creation continues to weigh on broader income growth. On the foreign investment front, capital outflows have accelerated, driven by attractive risk-free returns from US Treasury yields, the global focus on frontier artificial intelligence developments elsewhere, and a lack of domestic research and development expenditure in India.

The panel rated India’s current growth durability between 6 and 7 on a scale of 10, indicating that future progress depends heavily on policy execution rather than assumptions. For the domestic economy to transition successfully, structural reforms must address weak earnings growth, stimulate the private capital expenditure cycle, and foster an environment conducive to innovation and job creation.