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<p>This study employs the Markov switching model and real GDP growth data from 1981 to 2023 to project the future growth rate of the Indian economy. It also estimates the cumulative GDP loss caused by the COVID-19 pandemic in the short, medium and long term. It also investigates empirically when India will achieve the aspirational goals of becoming a USD 7 trillion economy and a developed country. The estimated forecasts of India’s real growth, both with and without the pandemic, along with assumptions of 5 per cent annual inflation and 3.10 per cent depreciation in the exchange rate each year show that (i) the nominal GDP loss amounts to USD 1.38 trillion in the medium term (till 2025) and USD 2.9 trillion in the long term (till 2035), indicating significant output hysteresis; (ii) India will attain the ambitious target of USD 7 trillion in 2033 and the developed nation’s per capita income level of USD 14,005 by 2048. With an additional 1 per cent growth annually, these milestones could be achieved by 2032 and 2046, respectively. These findings have significant implications for policymakers, offering valuable insights into the long-term impacts of the pandemic. They emphasize the need for targeted interventions to ensure sustained growth and the realization of ambitious economic goals.</p>

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COVID-19-induced GDP loss and India’s path to a developed economy

  • 期刊论文

  • 发表日期：

    2025年6月19日

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  • Mathew Koshy Odasseril,
  • K. R. Shanmugam

摘要

This study employs the Markov switching model and real GDP growth data from 1981 to 2023 to project the future growth rate of the Indian economy. It also estimates the cumulative GDP loss caused by the COVID-19 pandemic in the short, medium and long term. It also investigates empirically when India will achieve the aspirational goals of becoming a USD 7 trillion economy and a developed country. The estimated forecasts of India’s real growth, both with and without the pandemic, along with assumptions of 5 per cent annual inflation and 3.10 per cent depreciation in the exchange rate each year show that (i) the nominal GDP loss amounts to USD 1.38 trillion in the medium term (till 2025) and USD 2.9 trillion in the long term (till 2035), indicating significant output hysteresis; (ii) India will attain the ambitious target of USD 7 trillion in 2033 and the developed nation’s per capita income level of USD 14,005 by 2048. With an additional 1 per cent growth annually, these milestones could be achieved by 2032 and 2046, respectively. These findings have significant implications for policymakers, offering valuable insights into the long-term impacts of the pandemic. They emphasize the need for targeted interventions to ensure sustained growth and the realization of ambitious economic goals.