India to Become Third Largest Economy by 2027-28: Panagariya

New Delhi, May 17 (PTI) India could become the third largest economy globally by 2027-28 if the country continues the growth momentum witnessed in the last two decades, 16th Finance Commission Chairman Arvind Panagariya said on Friday.

He also said that during the last two decades, beginning 2003-4, India has ended extreme poverty. The extreme poverty, currently, is not more than 3 per cent of the total population.

Speaking at the CII's Annual Business Summit 2024, Panagariya said there is a problem of under-employment in the agriculture sector as a large portion of the workforce is engaged in the segment, and there is a need to move them out of the vertical to industry for faster urbanisation.

"A large part of the workforce in agriculture has to move to industrial or services economy, and that is the pathway to transformation," Panagariya said.

Currently, 45 per cent of India's workforce is employed in agriculture and the sector contributes 15 per cent of GDP. This means the average productivity in agriculture is one-third the average productivity in the economy.

"Growth has been across the board because poverty does concentrate in rural areas. With overall poverty falling to low levels, extreme poverty has been conquered largely, Panagariya said.

Talking about growth, Panagariya said in the last two decades, starting 2003-04, India has grown at about 8 per cent in real GDP in US dollar terms. In nominal terms, the GDP growth has been 10.2 per cent in the past 20 years.

"A lot of what we have today has transpired in the last two decades. During this period, we dealt with the global financial crisis and COVID shocks. It is that growth, which has put us in the fifth spot in international GDP ranking in dollar terms.

"This rate, if we continue to grow in the forthcoming years, we could become the third largest by 2026-27, but more likely 2027-28 is when it is likely to happen," Panagariya said.

India, with a GDP of roughly USD 3.4 trillion, is currently the fifth largest economy in the world, after the US, China, Germany and Japan.