The Exchanges

Q independence. That's the title of your book, right? India at hundred. Ernst & Young says that it will be 26 trillion. Goldman Sachs predicts it will be 50 trillion, but by 20, 75, uh, right. And you have tried to prove that by mathematical means, uh, right. So for a common man, how would you explain it? I will go into detail of various, but sitting at 3.7 trillion today.

A Yes, no, I think, uh, see, the first thing that we have to understand is over a long period, like 25 years, um, The power of compounding becomes very important. And, uh, let me give a couple of examples to anchor this idea. Um, you know, examples from other countries. Uh, let's take Japan from 1970 to 1995. During this period, the Japanese economy multiplied its GDP by 26 times, um, precisely 25.6 times. You know, in 1970, its GDP was about two hundred and twenty billion. Uh, by 1995, its GDP had multiplied to five and a half trillion. That's a 26 times multiplication. Um, Second, you know, take China. 1996 to 2021. And I did not give China as the first example because the first retort would be, oh, that's not a democracy, and that's why I chose Japan as the example. Um, and China, for instance, from 1996 to 2021 multiplied its GDP 22 times. Now, uh, again, over a 25 year period. What I am projecting here is about a 15 times multiplication, you know, compared to 26 times for Japan, 22 times for China. It's actually is not as, as aggressive. Um, and as you know, I have shown in the book, it's, uh, it's, it's based on very rigorous analysis, even the growth rates that I'm assuming in, you know, real, real growth rates. I've spent an entire chapter, you know, uh, building up From, you know, grounds up, you know, uh, based on investment rates, based on productivity, and not just ba…

AI assessment note: “The power of compounding becomes very important. And, uh, let me give a couple of examples”

Q So, uh, you also mentioned about, uh, uh, national productivity. You mentioned that, you know, uh, earlier we had 1.7% productivity. Now we have 2.7. What does it actually mean?

A Yeah. So I think it's important to, and I want to give you an example from first, again, a common example, think about how growth happens, whether it's, whether that's at the individual level or, you know, at the, at a firm level, industry level, or even at the country level. Growth is about two things, which is what, what investment do you make? And how productive that investment is. For instance, if you take, let's say you made this investment to, you know, to basically make this, do this podcast, right? So you must have bought all this equipment, you know, everything all, and, and that was an investment. So without that investment, the growth, you know, of basically of podcasting for you wouldn't have happened. So that's the first thing, right? But if you, you know, let's say you've built this infrastructure, you've actually made the investment. But you, you know, continue sleeping, let's say, right? You know, you, you don't, you don't do podcasts. If you're then, then that investment is not being put to good use, right? So how productive your, you know, your investment is. That's the second aspect. So for instance, and you may be, for instance, I mean, just, just to example, maybe you might be doing, you know, two podcasts a day, or maybe, maybe 10 podcasts a week. Um, if you're, if somebody else is, let's say doing 20 podcasts a week with the same equipment, he's being mor…

AI assessment note: “investment times productivity is basically what generates growth”

Q At, at what point of time a GDP per capita will cross out of China of today?

A As I said, that actually is, that's very hard to, you know, that's, that's much harder to assess at this point in time, because as I was telling you in your, in response to your previous question, you know, that, that, that actually requires one to have a good precise estimate of the growth rate of the Chinese economy. As I was saying in the past, they've grown at on average about, you know, eight, eight and a half percent. Um, but in the last few years, they've actually, their growth has declined significantly from eight, eight and a half to five percent. Um, and you know, but they are, as I said, going through a Through a lot of structural transformation. So it's very hard for me to actually give you these estimates because I mean, these will be very speculative. Um, and I don't want to speculate.

AI assessment note: “So it's very hard for me to actually give you these estimates”

Q And what's the current rate of growth of the US?

A US will be about the rate of growth will be, I think, um, the, the rate of growth would be close to three percent. I think that's what, um, And their inflation, as I said, is two percent. So, you know, so, so I estimate, I think their economy might be about, you know, 60, 65 trillion. So when we are 55, they may be about 60, 65 trillion. Again, projecting based on, so, so I'm not saying that we'll actually be, see, you have to see, you have to keep in mind that if the Indian economy is growing and their economy also growing, this is in nominal terms. So their economy also, you know, will, will be, will be higher as well. That's why now I understood this, this is a book on India and that's why I focused on, on India. And I've not basically gone into projecting what the size of the, of the other economies will be, but, but for our listeners, uh, you know, I just want to take the overall international view rather than just, uh, yes, yes, yes. No, I think from that perspective, as I said, we will be rubbing shoulders with the, with the, with the largest economy in the world that I think if you can grow at eight percent, we will be absolutely rubbing shoulders with some luck. We could possibly, potentially, we could be the, You know, the largest economy, but that's hard to say at this point, because that depends on the growth dynamics that will prevail in other countries, and especi…

AI assessment note: “the rate of growth would be close to three percent”

Q In India, what are those and why are still those there?

A Yeah. And the second is, uh, does GDP per capita grows along with this, like, it'll become, um, well, you know, so, so GDP growth overall divided by population growth is GDP per capita growth, right? So Um, population growth from here on, and I think we, you know, I've, I've put those estimates as well. We had done a chapter in the 2018, 19 economic survey showing what will be the growth rate of India's population up until 20, 20, 20, 50. So India's population growth is like, it is likely to be about half a percent, um, on average per annum. Um, so if, for instance, India grows at eight percent, uh, GDP growth grows at eight percent, With half a percent population growth, your GDP per capita will grow at seven and a half percent. If India's GDP growth is, let's say, seven percent, then our per capita growth will grow at six and a half percent. And here, you know, if you see, for instance, right, when India's GDP per capita was, um, you know, was, was, uh, 300 dollars. From there, now we've actually come to 2700 dollars, right? So GDP growth rate of about seven percent actually has delivered much higher, you know, has delivered growth in GDP per capita. That is, that, that has to happen because, you know, um, when you basically, um, grow, grow, grow, grow, grow faster, the benefits do reach the, you know, population as well. And there are other metrics actually. If you take this…

AI assessment note: “And the second is, uh, does GDP per capita grows along with this”