India' economy grew at an annual rate of 9.4 per cent during the three years -- 2005 to 2008 -- with agriculture averaging around 5 per cent per year. India also survived the global meltdown of 2008-09 due to minimal exposure of the financial sector to the sub-prime lending, and domestic demand driven growth. India's average annual growth rate during the two years, 2008-2010, was likely to be around 7 per cent (in real terms), with the current fiscal year outperforming the last one by over one per cent.
Favourable demographics, high savings rate, rising middle class, and underleveraged households suggest that domestic demand, and the economy, will continue to grow strongly.
Taking a long-term view and assuming an exchange rate of Rs 46 to 1 US dollar, an annual growth rate of 7 per cent in 2009-10 and 8.5 per cent during 2010-16, the market sentiment being overly buoyant, an inflation of 6 per cent per year, the size of the Indian economy in nominal terms is likely to be:
- $1.250 trillion in 2009-10,
- $2.400 trillion in 2014-15,
- and $4.640 trillion in 2019-20.
This implies a cumulative nominal annual growth of 14 per cent and an approximate four-fold increase in the coming decade.
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