As India approaches the centenary of its Independence, a national consensus is emerging around the aspiration of becoming a developed country by 2047 — the vision of Viksit Bharat. While the idea commands political and social support, the economic pathway to this goal is demanding. Achieving developed-country status is not just about growing faster, but about growing differently — combining scale with equity, productivity with employment, and technology with inclusion.
What does ‘developed country’ mean in economic terms?
There is no single global definition of a developed country. In practice, analysts rely on income thresholds used by institutions such as the , which classifies countries as “high income” based on per capita income measured at market exchange rates.
For 2024–25, this threshold stood at about $14,006. By 2047, this benchmark could rise to $18,000–$20,000. Given assumptions on population growth, inflation, and exchange rates, India would need to sustain an annual real GDP growth rate of roughly 7.5–8% for over two decades — a demanding but not unprecedented task.
Can India sustain 8% growth for two decades?
History shows that such transitions are possible. Economies in East Asia — including and Taiwan — achieved long spells of high growth through structural transformation and export orientation. followed a similar path later, dramatically expanding its share in world trade.
However, India’s structure is different. Its export share remains modest, and its growth is driven more by domestic demand. Therefore, India’s path to development cannot replicate any single model. It must rest on a carefully balanced, multi-sectoral strategy.
Raising the investment rate: the growth foundation
India’s Gross Fixed Capital Formation (GFCF) currently hovers around 33.5–34% of GDP. With an Incremental Capital Output Ratio (ICOR) close to five, this investment rate is insufficient to consistently deliver 8% growth.
To reach the desired trajectory:
- The investment rate must rise by at least two percentage points.
- Public capital expenditure, which has recently driven GFCF, cannot remain the sole engine.
- A revival of private investment is essential.
This requires identifying sector-specific bottlenecks — regulatory uncertainty, demand constraints, or financing issues — and addressing them systematically.
Absorbing new technologies without losing competitiveness
Technological change has always shaped growth, but innovations such as artificial intelligence are qualitatively different. AI is a horizontal technology, affecting every sector — from manufacturing and services to agriculture and governance.
For India:
- Technology adoption is unavoidable to remain globally competitive.
- Productivity gains are likely, but employment effects are uncertain.
- Faster obsolescence of capital will raise depreciation rates.
This implies that gross capital formation must increase further to offset faster capital wear and maintain productive capacity.
Protecting employment through labour-intensive sectors
Given the employment risks associated with automation, India must consciously support relatively labour-intensive activities. Sectors such as leather goods, garments, food processing, and hospitality absorb more labour per unit of output.
However, this focus cannot be protectionist or inefficient. Labour-intensive sectors must:
- Remain competitive and export-capable.
- Adopt appropriate technology without excessive job displacement.
- Integrate into global value chains.
This balance is critical to ensure that growth translates into broad-based employment.
Why development strategy must be multi-dimensional
No single sector can carry India to developed-country status. Export-led growth worked for some East Asian economies, but India’s size and diversity demand a broader approach.
Sustained growth must come from the simultaneous expansion of:
- Agriculture, through productivity and value addition.
- Manufacturing, both labour- and technology-intensive.
- Services, including modern and traditional segments.
- Exports, without over-reliance on any one market.
The state’s role is not to pick winners, but to create an ecosystem where enterprise, innovation, and competition can flourish.
Health and education as the core of inclusive growth
The post-1991 reform trajectory redefined the role of the state — not as a smaller government, but as a different government. Investment in health and education is central to this shift.
India’s demographic profile, with a young dependency ratio exceeding the old-age ratio until about 2055, creates both opportunity and risk. Without adequate investment in human capital, the demographic dividend could turn into a liability.
Long-term economic freedom and social justice require:
- High-quality public spending on health and education.
- Skilling and technical training aligned with future technologies.
- Reducing reliance on subsidies in favour of capability-building.
Growth with equity: not a trade-off
The choice between growth and equity is a false dichotomy. An economy that grows rapidly but leaves large sections behind cannot sustain either growth or social stability. Conversely, equity without growth cannot raise living standards.
India’s challenge is to weave growth and justice together — ensuring that rapid expansion also enlarges opportunities, choices, and freedoms for all citizens.
What to note for Prelims?
- High-income country threshold (World Bank): ~$14,000 per capita (2024–25).
- Required growth for India to reach developed status by 2047: ~7.5–8%.
- India’s GFCF: ~34% of GDP; ICOR around five.
- Concept of Viksit Bharat by 2047.
What to note for Mains?
- Challenges of sustaining high growth over two decades.
- Role of investment, technology, and employment in development.
- Need for a multi-sectoral growth strategy.
- Importance of health and education in linking growth with social justice.
