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 In the next three years, India is expected to become the third-largest economy in the world, with a GDP of $5 trillion, the Finance Ministry said in a review of the Indian economy just days before the Interim Budget (Feb 1).

This is not the Economic Survey of India prepared by the Department of Economic Affairs. That will come before the full Budget after the general elections, the ministry said.

Ten years ago, India was the 10th largest economy in the world, with a GDP of $1.9 trillion at current market prices. Today, it is the fifth largest with a GDP of $3.7 trillion (est. FY24), despite the pandemic and despite inheriting an economy with macro imbalances and a broken financial sector, the review said.

This 10-year journey is marked by several reforms, both substantive and incremental, which have significantly contributed to the country’s economic progress. These reforms have also delivered an economic resilience that the country will need to deal with unanticipated global shocks in the future.

The government has, however, set a higher goal of becoming a ‘developed country’ by 2047. With the journey of reforms continuing, this goal is achievable.

The reforms will be more purposeful and fruitful with the full participation of the state governments. The participation of the states will be fuller when reforms encompass changes in governance at the district, block, and village levels, making them citizen-friendly and small business-friendly and in areas such as health, education, land and labour in which states have a big role to play, it added.

The strength of the domestic demand has driven the economy to a 7 per cent plus growth rate in the last three years.

The robustness seen in domestic demand, namely private consumption and investment, traces its origin to the reforms and measures implemented by the government over the last ten years.

The supply side has also been strengthened with investment in infrastructure – physical and digital – and measures that aim to boost manufacturing. These have combined to provide an impetus to economic activity in the country.

Accordingly, in FY25, real GDP growth will likely be closer to 7 per cent, the Finance Ministry said.