New Delhi: India’s economy is poised to become a $2 trillion one by the end of 2014-15—provided it grows by at least 5% this year and the rupee does not resume its downward slide.

This is a real number and not adjusted for purchasing power parity, or PPP, according to which the Chinese economy will be larger than that of the US by the end of 2014.

India is expected to grow by 5.4% this year, up from 4.7% in 2013-14. The economy grew by 4.5% in 2012-13, a decade’s low, and but for the loss in momentum over the past two years, would have crossed the $2 trillion mark already.

Sure, the $2 trillion mark is merely a numerical milestone. For instance, it doesn’t mean much in terms of per capita income (India’s current gross domestic product, or GDP, is around $ 1.8 trillion), and India will remain a lower middle-income economy. Its economy will have to grow by at least four times and its population remain at the same level for it to become an upper middle income economy.

The Indian government factored in the $2 trillion milestone in the Union budget for this financial year. The central government budget for 2014-15, presented in July, projected GDP at ₹ 128 trillion assuming 13.4% nominal GDP growth, which at Wednesday’s closing of the rupee at 61.395 amounts to $2.1 trillion.

At the turn of the millennium, the Indian GDP was about $481 billion and by 2007 it was measured at $1.2 trillion. That means it had grown two-and-a-half times in seven years. And effectively, in a span of 14 years the Indian economy has grown more than four times.

To be sure, the economy is plagued by structural imbalances. Services account for a preponderant share of GDP while the share of manufacturing has remained stagnant at 15% for several years.

The bigger challenge is that this growth has not been accompanied by a commensurate growth in employment. According to the Planning Commission, between 1999-2000 and 2009-2010, the number of jobs in the so-called formal sector fell 2 million and the 4.62 million jobs created were all in the informal sector. To put these numbers in context, around 12 million people join the job market every year.

This rapid expansion of the economy, accompanied by poor employment growth, has come to be referred to as jobless growth—something that cost the Congress-led United Progressive Alliance dearly in the 16th general election.

Another point of concern has been the fact that Indian agriculture, which accounts for 18% of GDP, still employs a little under 50% of the country’s workforce. That proportion itself is a milestone; it was only in 2013 that the number of people employed in agriculture fell below 50% of all workers.

The rapid growth of the Indian economy has had a positive impact on poverty levels. At the poverty level of $1.25 a day, the number of poor in India has declined significantly from 41.6% of the population in 2005 to 32.7% of the population in 2010, according to the World Bank.

The same trend was also reflected in the 2011 Census, which showed that materially most of the country had traded up between 2001 and 2011. For instance, in 2011, two in three households had access to banking services, up from one in three a decade ago. In the same period, the number of households with a television doubled.

At the same time, the rapid economic growth has been accompanied by a spurt in urbanization.

Since 1951, the proportion of rural population that lives in villages with a population less than 2,000 has decreased from 63% to 28%. Meanwhile, the proportion of that living in large villages (population more than 5,000) has risen from 5% to 17%, according to the Indian Institute for Human Settlements.

Some of these villages have been classified as Census Towns by the Census—places where farming is no longer viable and people have moved on to other professions. Between 2001 and 2011, the number of such towns trebled, to 3894. The literacy rate also increased significantly in between to 74.04% in 2011 from 65.38% in 2001, according to the Census of India.

Although becoming a $2 trillion economy is an important milestone, it still is no more than a number, said Crisil Ltd chief economist D.K. Joshi.

“We have many people still under poverty. India and China were of the same size two decades ago and now China is a decade ahead of us," he said. “India needs to grow at a much faster rate to provide employment opportunities to the youth. At the same time, the quality of growth is also very important to address issues of inequality and regional disparity."

Prashant K. Nanda contributed to this story.

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