(Image source from: India all set to enter $2 trillion club})

India might soon become a part of an exclusive group of nine countries, whose annual gross domestic product (GDP) is above $2 trillion (Rs. 120 lakh crore at 60 rupee per dollar). That's right!

According to Nomura, India's nominal GDP could leap the $2 trillion threshold this year and touch $3 trillion by fiscal year 2016-17. Whoa!

India has been extremely close to achieving this distinction with its GDP hovering in the $1.8 trillion to $1.9 trillion range over the last three years. However, a dip in inflation and more stable exchange rate might soon take its GDP above the $2 trillion mark in 2014.

The statistical landmark comes at a time when a new government led by Prime Minister Narendra Modi promised country of higher growth and more jobs.

The projection comes days after India's April to June GDP grew at 5.7 per cent, the fastest in nine quarters. The new government, which assumed office at the end of May, has sought to take credit for faster growth during the period though analysts have attributed the rebound to the base effect (India grew at just 4.7 per cent in same quarter during 2013-14) and steps taken by the previous government to kick-start capital investments and spur consumer demand. (Read the full story here)

Over the next three quarters, the new government's efforts are likely to play an important role in pushing growth, analysts say.

The $2 trillion club will only be a statistical landmark and a psychological boost. India has a long way to go before it catches up with China, whose GDP is over $9 trillion (2013). But India will come close to its other BRICS counterparts, Brazil and Russia, whose economies are valued over $2 trillion. US is the world's biggest economy, with a nominal GDP of around $17 trillion (2013).

GDP is a measure of a country's prosperity, so higher GDP will help create jobs and lead to higher incomes. According to Nomura, nominal GDP per capita will rise from around $1,500 in FY14 to above $2,000 in FY17, with a concomitant rise in real incomes. Higher real per capita incomes would increase domestic purchasing power and boost consumption demand, the brokerage added.

The growing size of the domestic market will attract more capital inflows, as portfolio and FDI investors will likely seek to capitalise on the bigger pie, Nomura says. This will fuel gains in equity markets and also lead to infrastructure development.

India's GDP grew at 4.7 per cent last year. According to estimates, India needs to grow at 8 per cent per annum to provide jobs for over 10 million people, who join workforce every year.

(Source: NDTV Profit)

AW: Suchorita Chowdary