States need to nearly double growth to achieve $1-trillion economy goal in time

India IPO

Updated July 09, 2024

States set to miss $1 trillion target img

All states are set to miss their respective $1-trillion economy goal

States need to nearly double growth to achieve $1-trillion economy goal in time

According to an analysis by Moneycontrol, India's states will need to significantly increase their economic growth rates to achieve their $1-trillion economy targets on time.

Uttar Pradesh recently announced plans to adopt a public-private partnership model to reach its $1-trillion economy goal by FY28. To achieve this, the state must expand its economy by nearly 50% over the next four years.

In the FY25 Budget, the government has set a modest growth target of 5.8%, up from 4.6% in FY24.

The projected size of Uttar Pradesh's economy in FY25 is just under $300 billion. Over the past decade, it has grown at an average annual rate of 9.9%, increasing to 12.6% post-pandemic (FY22-24). Even with this accelerated growth, achieving a trillion-dollar economy goal will still take another eight years. Based on historical growth rates, Uttar Pradesh is not expected to reach this milestone until FY38.

Across the board, current growth trajectories suggest that all states are likely to miss their $1-trillion economy targets. Maharashtra, for instance, is anticipated to achieve this by FY33 instead of FY28, while Tamil Nadu may do so by FY35, five years later than its original 2030 target.

Karnataka and Gujarat are also projected to achieve their goals late, with Karnataka potentially surpassing Maharashtra to become the third largest economy by FY31.

Maharashtra, expected to reach $0.5 trillion in FY25, forecasts a modest growth of 5.5%, compared to its 10-year compound annual growth rate (CAGR) of 9.6% and a robust 13.4% growth post-pandemic.

Gujarat and Tamil Nadu, both with economies exceeding Rs 2 lakh crore, are expected to experience faster growth in FY25 compared to their long-term averages. Post-pandemic growth rates suggest that all five states could reach the $1-trillion mark by FY36.

Karnataka, which saw a surge of 22.1% growth between FY22 and FY24, anticipates a slower growth rate going forward. The state government aims for 9.4% growth in FY25, slightly lower than its 10-year average of 12.2%.

In conclusion, achieving the $1-trillion economy target will require sustained and accelerated economic strategies across Indian states.