India faces mounting hurdles to reach developed economy status by 2047

The Indian economy expanded by more than 7% in the previous quarter, but according to an analysis by Bloomberg, this pace may prove insufficient to realise Prime Minister Narendra Modi’s target of transforming the country into a developed nation by 2047.

Modi aims for India to attain developed economy status by 2047, which marks the centenary of the country’s independence from Britain.

Ashok Lahiri, a representative of a state-backed think tank, argues that gross domestic product (GDP) must expand by approximately 9.25% annually over the next 21 years to achieve this objective.

The programme, titled “Viksit Bharat” or “Developed India”, has become one of the foremost priorities of Modi’s third term as prime minister.

However, some economists express doubt over whether India can reach this target at its current pace of expansion.

Historical growth rates lag behind targets

Economic growth averaged 6.3% between 2000 and 2024. This figure sits well below the country’s current potential rate of 7.5% to 8%.

The report noted that over the past 50 years, the Indian economy recorded growth of 9.25% or higher on only three occasions: in 1975, 1988, and 2021.

Should the Indian economy grow at a rate below 8% annually, it is assessed that the country could slip into what is known as the “middle-income trap”.

This concept describes an economic condition in which rising wages and costs erode the advantage of cheap labour, whilst worker productivity and skill levels have not yet risen enough to compete successfully with developed economies.

The report also noted that attaining high-income country status remains a distant prospect. As of 2025, per capita income in the country stands at $2,813.

For India to cross the high-income threshold by 2047, this figure must increase more than sixfold to reach approximately $18,000.

Targets missed across industry and investment

Economists state that the manufacturing industry must be expanded to accelerate India’s growth.

The Modi administration is also placing emphasis on this sector, yet its share of GDP has remained at roughly 16% to 17% for more than a decade. This proportion falls significantly short of the 25% target set by Modi.

Economists further emphasize that expanding high-tech exports, lifting private sector investment, and curbing reliance on energy imports could accelerate economic growth.

It is also noted that the country needs to draw more foreign investment into manufacturing. Despite record levels of foreign direct investment, India is reportedly struggling to retain this capital domestically.

Indian companies are progressively stepping up their investments abroad, whilst foreign investors are scaling back funding for local ventures.

A high domestic savings rate is likewise critical for India’s economic growth.

Savings allow the construction of factories and infrastructure to be financed without excessive reliance on costly borrowing and foreign capital. However, the capacity of Indian households to save remains constrained by relatively low income levels.

According to a 2021 report by NITI Aayog, approximately 87 million people in India aged between 15 and 29 are neither employed nor in education or vocational training.

Owing to a shortage of employment opportunities, roughly 60% of the working population is self-employed, with the bulk of this cohort engaged in the low-income agricultural sector.

Shumita Deveshwar, Chief Economist at GlobalDataTS Lombard, noted that without a rise in private sector investment and an acceleration in job creation, India will struggle to maintain GDP growth above 6%, let alone reach the pace of over 8% required to achieve developed economy status.

The country’s administration plans to undertake record borrowing of 17.2 trillion rupees (approximately $187 billion) during the fiscal year starting 1 April. This sum represents an 18% increase compared with the current year and surpasses Bloomberg’s previous forecast of 16.5 trillion rupees.

The government projects that the ratio of the fiscal deficit to GDP, which stands at 4.4% in the current period, will decline to 4.3% in the next fiscal year.