The 20 reforms that could take India to a $20 trillion economy by 2036: Report

India may achieve a $20 trillion economy by 2036, but achieving this goal will require a comprehensive and coordinated reform effort across various sectors, according to a new Equirus research report. The report outlines a 20-point agenda that covers key areas such as infrastructure, capital markets, human capital, services, and urban governance.

The current Indian economy, valued at approximately $3.7 trillion, would need to grow about five and a half times to reach the $20 trillion mark, which would translate to around 18% annual growth in nominal terms.

China's experience demonstrates that such a growth rate, while challenging, is feasible. China managed an 18% annual growth rate in dollar terms for 11 consecutive years, starting from a GDP base of approximately $1.7 trillion. The report highlights that India can achieve such growth if the reforms are implemented consistently and effectively across all identified sectors.

The proposed reforms encompass measures aimed at unlocking investment without straining government finances. One proposal is to integrate fuel under the Goods and Services Tax regime. Additionally, the report emphasizes the importance of states fully utilizing their budgeted capital expenditure, which could add around Rs 5.2 trillion to GDP without necessitating fresh borrowing.

Another proposal involves creating an India sovereign fund, similar to Singapore's Temasek, which could generate capital of approximately $249 billion through pooling the government's equity holdings in public-sector companies. This fund could provide recurring funding for infrastructure and other priorities.

Deepening India's capital markets is also seen as crucial for growth. The report recommends equalizing tax treatment between bonds and equities, gradually shifting small savings towards market-priced bonds, discontinuing advance tax, and reducing tax deducted at source on investment income to a flat 5%. These changes could free up significant working capital while fostering a more robust corporate bond market.

Services, currently accounting for about 54% of India's GDP, need to become an even larger component of the economy for the country to reach the target. Services could expand to surpass 65% of GDP, with economic value growing from around $2 trillion to over $11 trillion. The report proposes a national policy to increase the number of global capability centers from over 1,800 to 5,000, potentially generating an economic impact of $470-600 billion and creating 20-25 million jobs.

Tourism is another area with significant potential for India. The report estimates that matching Turkey's performance could bring in an additional $21 billion annually. However, higher growth will also hinge on enhancing India's productivity and innovation capacity. The report calls for restoring research and development incentives, promoting private participation in education, implementing outcome-based funding for universities, and expanding apprenticeship programs.

Equirus estimates that this reform package could raise underlying GDP growth from around 10.5% to 14.2%. Nevertheless, the rupee would also need to appreciate by around 3-3.6% annually to fully support the $20 trillion target.