On Saturday, 15 June, Prime Minister Narendra Modi declared: “(The) goal to make India a $5 trillion economy by 2024 is challenging, but achievable, with the concerted efforts of states." This goal has solid support from the International Monetary Fund (IMF). Its most recent projections suggest that India’s gross domestic product (GDP) will touch about $4.7 trillion in 2024. This is close enough to $5 trillion to make the latter a credible headline target, and 2024 is a natural year to focus on given that Modi and his government will be batting for a hat trick in general elections that year.

Taking a cue from this, a bevy of economists and analysts have started a “debate" on how best to achieve this target. Unfortunately, this is, in our judgement, an entirely misguided and problematic exercise.

The crux is this: The IMF’s projection and Modi’s goal for GDP is stated in terms of nominal US dollars. In other words, the size of India’s economy as measured by the value of the dollar that will prevail in 2024. While statistically valid, this is an economically meaningless construct, at three removes from what average Indians care about—real rupee GDP per capita. Ask: In 2024, will an ordinary middle-class Indian be revelling in the fact that his country’s economy is worth close to $5 trillion, or will he be asking what is the purchasing power of his own income in rupees? Clearly, the latter affects his and his family’s life prospects, not the former.

So, who gains from a $5 trillion economy? Evidently, large Indian multinational firms, or high net-worth individuals looking to invest abroad, or deep-pocketed foreigners looking to invest in India may benefit from India’s larger aggregate dollar footprint. None of this is of any concern to the well-being of the average Indian.

This criticism can be made precise by looking at the underlying data guiding the IMF’s projections, and comparing its data to official Indian government data, as reported annually by the ministry of statistics and programme implementation (Mospi). Crucially, the IMF reports aggregate GDP in nominal dollars, from which we have extracted the implied growth rates, while the Mospi, among other indicators, reports real GDP per capita in rupees. The graph alongside presents the striking results of this data comparison.

The first column shows real rupee GDP per capita growth for the years 2015-2019 (note: we use the convention of reporting the fiscal year with the second of the calendar years it straddles, for simpler comparability with international data in calendar years). This series is quite stable, ranging from 5.6% to 6.8%, with an average for this period of 5.92%. Notice that, via the “rule of 70", this implies that real income for the average Indian will double in 10-11 years. The second column reports the growth rate of aggregate GDP in nominal US dollars for the same time period, and the data is all over the map, from a low of about 2.4% to a high of 15.8%, with an average of 7.9%.

Why the big fluctuations, and the fact that dollar aggregate GDP on average grows faster than real rupee per capita GDP? These are the three removes we mentioned earlier. To convert per capita real rupee GDP growth into nominal dollar aggregate GDP growth, we must add an adjustment for population growth, for domestic (Indian) price inflation, and for the change in value of the nominal Indian rupee exchange rate vis-a-vis the US dollar. While population growth and, at least in recent years, inflation have been stable, exchange rates fluctuate massively over time, and this leads to the bizarre result that (for example) India’s nominal dollar GDP growth rate fell from 15.8% in 2017 to 2.4% in 2018, while real rupee GDP per person remained rock steady at 5.7% over this two year period. This is purely an artefact of exchange rate fluctuations, which bedevil the former but not the latter measure.

The third column gives us ample cause to be wary of the IMF’s projections. Compare the second and third columns, and you will see how far off the mark the projection was just about each year. Notice also that the average projected growth rate over the same 2015-2019 period is about 9.2%, or fully 1.3 percentage points higher than the actual realizations.

So, how credible are the IMF’s projections for the coming five years? The average of the 2020-2024 projections is 9.7%, which makes possible the claim that India will approach a $5 trillion GDP by the terminal year. Yet, if recent experience is any indicator, the IMF appears consistently to overestimate rather than underestimate India’s growth prospects. This suggests to us that the $5 trillion goal may indeed remain out of reach.

Much more importantly, a focus on the level of GDP in nominal dollars deflects debate into speculation on the behaviour of inflation and exchange rate dynamics over the coming five years, and takes the focus entirely away from what matters, which are the structural economic reforms necessary to boost real rupee GDP per capita. Notice that the more serious defenders of the $5 trillion target routinely fall back on assumptions about inflation and exchange rates to rationalize the goal and are not claiming that real rupee GDP per capita will grow above its present fitful rate.

Modi must resist the temptation to fall into the Washington trap of fixating on an arbitrary dollar GDP level and focus instead on what he has correctly said his government cares about, the well-being of average Indians. The $5 trillion target by 2024 is a dangerous distraction.

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Vivek Dehejia & Rupa Subramanya are, respectively, a Mint columnist and a Mumbai-based economic researcher and writer.

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