Maharashtra, Karnataka and Gujarat to be $1 trillion economy by FY39: Ind-Ra

Eight states to hit $1 trillion-mark by FY47

New Delhi: Maharashtra, Karnataka and Gujarat are likely to hit the $1 trillion economy mark by FY39 if the pace of growth in these states remain similar to what was recorded in the past seven years, India Ratings and Research (Ind-Ra) said in a report on Monday.

To achieve the $1 trillion-mark, Karnataka would require a nominal gross state domestic product (GSDP) growth (in USD terms) of 8.4%  annually till the financial year 2038-39. Between FY16 to FY23, Karnataka posted an average annual GSDP growth of 8.4% in nominal dollar terms.

Maharashtra, which is the biggest state economy, can achieve the $1 trillion GSDP feat by FY39 with an average annual growth of 5.5%, while Gujarat requires a growth of 8.3%. These are the same growth that these states have recorded between FY16 to FY23, said Paras Jasrai, Senior Analyst at Ind-Ra.  

After Maharashtra, Karnataka and Gujarat, Tamil Nadu would be the next to reach $1 trillion in FY41, if it sustains the estimated nominal GSDP growth (USD terms) of 7.2% same as during FY16-FY23 in the coming years.

However, all these states have set targets to achieve a $1 trillion economy much ahead.

The Maharashtra government has set a target to reach $1 trillion by FY28. To achieve this, Maharashtra’s nominal GSDP (in USD terms) will have to grow at a staggering CAGR of 18.0% during FY24-FY28. Similarly, Gujarat and Karnataka are aiming to reach the $1 trillion mark by FY31 and FY33, respectively. This would require their nominal GSDP (in USD terms) to grow at a CAGR of 17.4% and 13.5%, respectively, from FY24.

Tamil Nadu aims to attain the $1 trillion mark by FY31, for which its nominal GSDP (in USD terms) has to grow at a CAGR of 16.6% from FY24.

Ind-Ra’s estimates show that India would have eight sub-national economies which would hit the $1 trillion mark by FY47.

Uttar Pradesh is estimated to reach $1 trillion by FY42, subject to its nominal GSDP growth (USD terms) growing at an estimated CAGR of 7.1%, like during FY16-FY23. UP though is targeting to attain it by FY28. For this, its nominal GSDP (in USD terms) will have to grow at a CAGR of 29.0% from FY24.

Other states that are likely to reach $1 trillion-mark before FY47 are Madhya Pradesh, Telangana and Andhra Pradesh, provided they maintain their nominal GSDP growth (in USD terms) of 9.3%, 9.0% and 8.3%, respectively, like during FY16-FY23, onwards of FY24.

Ind-Ra analysis shows that in FY23 the top five state economies remained the same as FY14, only their ranks changed. Karnataka displaced UP to become the third-largest state economy of India in FY23. Maharashtra, Tamil Nadu and Gujarat were the other states in the top five in FY23.

West Bengal, Rajasthan and Andhra Pradesh retained their positions in terms of sixth, seventh and ninth largest economies, respectively, in FY23 in relation to FY14. Kerala which used to be in the top 10 in FY14 was replaced by Telangana and Madhya Pradesh entering FY23 as the eighth- and 10-largest state economies, respectively.

The other notable change was Odisha emerging as the 13th-largest state economy in FY23, ahead of Punjab and Bihar.

As per the World Bank’s income classification level for FY23, Goa and Sikkim were the only states in the upper middle-income category (per capita income of $4,256-13,205). UP and Bihar were in the low-income group category (per capita income less than $1,085) with the rest of the states being in the lower middle-income category (per capita income between $1,086-4,255) in FY23.