Sanjeev Sanyal: ‘India’s per capita income is around $3,000. To have higher income, you need a larger GDP’

India’s per capita income is now around $3,000 but remains low, Economic Advisory Council to the Prime Minister (EAC-PM) member Sanjeev Sanyal said on Monday. He suggested that sustained growth in overall GDP is essential to raise per capita income. He also noted that India added its fourth trillion-dollar milestone in just the last four years — driven by the power of compounding.

“We are no longer at $2,500. We are now somewhere around $3,000 per capita income, which is still low. There too, this compounding process will matter. So of course in order to have higher per capita GDP, you need to have a larger GDP,” Sanyal said in an interview with News18.

“So this growth that we just talked about (India becoming the fourth-largest economy) is important but we need to speed it up and we will be doing this, sustaining this growth at a time where the external environment may not be as conducive as was the case during China’s high growth phase.” 

The noted economist added that India’s economic growth has accelerated in recent years, with the country moving from $3 trillion to $4 trillion GDP in just four years. “Welcome to the joys of compounding,” he said, describing the growth as the result of around 35 years of sustained expansion.

Sanyal said India has grown at 6–7% consistently, while many large economies have struggled to reach 2–3%. “Countries like Japan or Germany are barely growing at all,” he said.

On India potentially overtaking Germany to become the third-largest economy, he said this may happen in the next 18 to 24 months. “We are growing at 6%, they are growing at less than 1%,” he said, noting that in relative terms, global headwinds would affect both countries.

However, he added that in absolute terms, global uncertainty does impact India’s ambition to become a developed country. “We would like to grow even faster than this, perhaps over 7% a year, but it’s difficult to do this under these circumstances,” he said.

To support higher growth, Sanyal highlighted the need to expand bilateral trade agreements and adapt to new global conditions. “We have now recently done a free trade agreement with the UK. We are in advanced discussions on free trade with the US as well as with the European Union,” he said. He added that India already has trade agreements with Australia, Japan, and the UAE.

On the domestic front, Sanyal said inflation has come down and is currently at 3%, which provides room to reduce the cost of capital in the long to medium term. He also said that GST has unified India’s market and is a major improvement, though further reforms are needed. “There are always complaints about improving the GST, but the fact is GST is a huge innovation,” he said.

He stressed the need for ongoing process reforms, including improving the ease of doing business, ease of living, and attracting international capital. “We want the world’s companies to come here and invest. We want to become a part of the global supply chain,” he said.

On recent debate over foreign investment, Sanyal said, “It is true that the gross FDI is doing well. It is also true that net FDI has fallen.” He explained that while new investments have come in — over $80 billion last financial year — existing investors are also repatriating returns. “What do we want as a policymaker? I want that gross FDI to keep growing and I also want that existing investors retain their money here in India rather than repatriate it,” he said.

Sanyal also addressed regional economic gaps, stating that the western half of India has performed better than the eastern half. “The best way for percolation to happen is for India to invest in big physical infrastructure in eastern India. And you’re beginning to see that,” he said.

India has overtaken Japan to become the fourth-largest economy, as confirmed by NITI Aayog CEO B.V.R. Subrahmanyam. According to IMF projections, India’s nominal GDP is expected to be $4.19 trillion in 2025, with a projected growth rate of 6.2% for 2025–26. Per capita income has doubled from $1,438 in 2013–14 to $2,880 in 2025.