However, if the rupee depreciates much, the economy in dollar terms would be that much smaller.
India is eyeing the tag of the world’s third-largest economy by 2030, after overtaking France as the sixth-largest economy and coming close to the UK, which is at the fifth place.
Economic Affairs Secretary Subhash Chandra Garg said on Saturday the Indian economy is at a take-off stage and is expected to be the world’s third largest by 2030 with GDP worth $10 trillion.
This means India is aiming to overtake the UK, Japan and Germany by 2030, to be behind only the US and China.
In the first 40 years of independence, the country hardly grew at 3.5 per cent and today, 7-8 per cent is the norm, Garg said at a function to mark the platinum jubilee celebrations of the Institute of Cost Accountants of India.
“Eight per cent growth is very much achievable... If we keep that... we can look forward to be an Indian economy of $10 trillion, which will be the third-largest economy in the world," Garg said.
What Garg said is a possibility, at least theoretically. According to the World Bank data, India had a GDP of $2.59 trillion in 2017, higher than $2.58 trillion of France.
If India grows at 8 per cent a year at constant prices on average, the economy could expand to over 10 trillion by 2028 itself. This would be subject to the assumption of 4 per cent inflation rate a year, which is also the target range of the Reserve Bank of India.
The 4 per cent inflation rate would make the economy grow by 12 per cent a year at the current prices. If the inflation rate turns out to be higher, then the target would be met sooner.
If the economy grows by 7 per cent a year on average, it would cross 10- trillion mark by 2030, subject to 4 per cent inflation rate a year.
However, these calculations are subject to the dollar-rupee matrix. If the rupee depreciates much, the economy in dollar terms would be that much smaller.
Although the economy grew at a four-year low of 6.7 per cent in 2017-18, the government projects it to grow between 7-7.5 per cent in the current financial year.
Devendra Pant, chief economist at India Ratings, said India is likely to grow at 7.5 per cent for about a decade, if there are no major headwinds or policy goof-ups.
However, to maintain that growth rate, the country would have to work on its supply side issues, otherwise a sustained real economic growth rate of 7.5 per cent would raise inflation and heat up the economy, he warned.
Earlier, Jaitley had expected India to become the bigger economy than UK's by next year. Britain's economy was just about $25 billion bigger than India’s at $2.62 trillion in 2017. However, there was a significant gap between the top four economies and India.
In 2017, the US was the world's largest economy with a size of $ 19.39 trillion, followed by China ($12.23 trillion). Japan ($4.87 trillion) and Germany ($3.67 trillion) are at the third and fourth places, respectively, according to the World Bank data.
Photograph: Anindito Mukherjee/Reuters.