Is there a credible path for India to achieve its goal of becoming a USD 5 trillion economy by 2025 post the Covid setback or is it a chimera?
To answer this question we have to look at the key realigned targets now necessary to achieve this target, building on the past momentum and also bold outcome oriented priorities which will now be necessary. It took the Indian economy eight years to double to $2 trillion in 2014 and another seven to grow to just under $3 trillion currently. At that rate, the leap to a $5-trillion economy by 2024- 25, as envisaged by Prime Minister Narendra Modi’s – seems a very difficult ask , especially after the Covid-19 pandemic and its lingering after effects. India becoming a USD 5 Trillion economy requires the country to grow at ten per cent per annum for the next five years in order to achieve this by 2027. So is it possible?
The economic impact of the first wave was severe; the health impact of the second wave was serious. The contraction of the economy has hit hard the daily wage earners and migrant labour. Life Versus Livelihood emerged as a serious issue. Following the aggressive and effective implementation of the vaccination drive this is now back in order and we can actively pursue our goal of the 5 trillion USD economy albeit with the flag post shifted to 2027.
The government has set specific targets, sectoral push and PLI scheme to turbocharge manufacturing. FDI inflows are at record levels and todays foreign exchange reserves at 604 USD Billion is the third largest globally.
A big game changer to fund capital expenditure is to go for larger divestments in the Public Sector Enterprise. The current target of Rs. 65000 crores is far too modest and needs to be at least quadrupled. A renewed and committed focus on building new cities, ports, bridges, high-speed rail and highways will have a significant multiplier effect on jobs and the economy and also help reduce unemployment. This rebooting of infrastructure has to be a combined effort of Centre, States and the Private Sector.
Challenges can be turned into opportunities. Covid showed how under adversity also India could step up manufacturing a strong testimony to India’s manufacturing prowess. The Government of India already has several policy drivers including the 500-gigawatt (GW) green energy plan, production-linked incentive (PLI) manufacturing push, digital economy drive, Rs. 145 lakh crore-plus infrastructure pipeline, and targeted incentives for micro, small, and medium enterprises (MSMEs) to set the pace of growth. Besides, sound taxation policies, like the rationalisation of GST rate slabs, and improved compliance measures will provide the government with adequate revenue buffers to drive fiscal policies. Spending on health infrastructure and education need to be significantly increase as fundamental building blocks of the engine of growth.
To help its transition from an agrarian to a service sector economy, the Government launched the $1.9-trillion National Infrastructure Pipeline (NIP) in 2020. That was complemented by the launch of the Rs. 100 lakh crore Gati Shakti plan last October. The government is aiming to increase the length of the national highway network to 200,000 km, create more than 200 airports, heliports and water aerodromes, and double the gas pipeline network to 35,000 km by 2024-25. In addition, it aims to set up 11 industrial corridors, two new defense corridors, 4G connectivity in all villages, and increase renewable energy capacity to 225 GW from 87.7 GW. A key thrust on export and manufacturing. So there are a large number of moving parts. Key is execution on time. The fundamental building blocks are in place.
‘The $5 Trillion Economy: Rhetoric or Reality?’. The answer has many divergent views, but clearly — the goal of a $5 trillion economy is not so easy to come by, given certain factors that bound the Indian Economy.
Clearly it would be pragmatic to accept that the target off a 5 Trillion USD economy by 2025 is now not achievable but in five years’ time by 2027 it is a distinct possibility provided the GDP grows at a compounded growth rate of 10% pa for the next five years.