Page 119 - Abhivruddhi

Section Four: Projections of Dollar Nominal GDP Based on a
Macroeconomic Framework
It helps to reiterate that the IMF data and projections were for $
NGDP. With 2018 GDP at $ 2716.8 tn. as of April 2019, to reach the
IMF projection, made with year 2018 the implicit base, of $4729 in 2024
implies a $NGDP growth rate of 9.8%. Pushing up the IMF’s projection
from $4729 bn. to the PM’s $5 trillion target for 2024 required $NGDP
growth of 10.8% over the six-year horizon, one percentage point higher
than the IMF implicit projection of 9.8% in mid 2019.
Along with the 10.8% $NGDP growth above, assume a rupee decline
of Rs. 1 per year starting at Rs. 70/$ in 2018, which is equivalent to
depreciation of 1.2% per year. This then implies NGDP growth of 12% in
Rupees (10.8% plus 1.2%) corresponding to the $ 5 trillion level for 2024.
By way of comparison, during 2005 to 2018, actual nominal GNP
growth averaged 13.6%, substantially higher. It has been a common rule
of thumb for fiscal projections relating to GST mandated transfers in 2017
that India’s NGDP growth benchmark is around 14%. Thus, in real time in
2019, it can be said that a 12% Rs. NGDP growth, was, actually speaking,
a rather modest target compared to the prevailing 14% projection for
fiscal purposes. From 2018 onwards, the gap between the assumed 12%
versus benchmark 14% NGDP growth would end up to about 15% of the
level of GDP by 2024.
The sub Section titled Real Time Data and Real Time Analysis in
the Appendix of Chapter 7 of Moorthy (2017, Pg. 174) discusses the
need to use real time data (shown in Appendix Table)and mentions the
Philadelphia Fed real time database.
This growth rate is calculated using standard technique of dividing the
log difference by the number of years to obtain a Compounded Annual
Growth Rate. Thus (Ln 5000 – ln 2701)/6 = (8.517 – 7.901)/6 = 0.1026.
The anti-log of that is 1.108, implying a CAGR of 10.8%. For small values
of g, one can use the approximation ln(1 +g) ≅ g.
While this paper ends up providing a numerical defense of the target,
the PM’s defense of the target was along different lines. In a newspaper
article he was cited as saying, “It is important to know about this because
there are some people who doubt the capabilities of Indians. They are
saying it is very difficult for India to achieve this goal. However ,it would
be a matter of courage, of new possibilities, of the sacrificial fire of
development, of serving Maa Bharthi, and dreaming of New India. These
dreams are largely linked to the goal of $5 trillion economy,” Chawla,

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