At present, India is the fifth-largest economy in the world with a GDP (Gross Domestic Product) of around US$ three trillion in 2019-2020. If the US five trillion dollar target is translated into reality then the country will aside Germany to become the world’s fourth-largest economy in 2024-25, only behind the US, China and Japan. India is aimed to be the world’s most populous country by 2025 along with at least 145 crores (1.45 billion) people. The target is the minimum the people of India can aspire for. Now we will tell you how India can or cannot achieve its five trillion dollar economy aim by 2024.
IF it can be a five trillion dollar economy. Then how?
1. Government Response
As per the current situation when the government announced on May 12, 2020, the Aatmanirbhar Bharat Abhiyan which means self-reliant Indian initiative which combined relief, policy reforms and fiscal and monetary measures to help business and individuals to cope with the situation created by the pandemic. The government on June 20, 2020, launched a Rs 50,000 crores rural jobs programme named Pradhan Mantri Garib Kalyan Rojgar Abhiyan. This programme aimed at creating livelihoods for jobless migrant workers who moved back from cities to their villages during the lockdown. On October 12, 2020, the government had announced a new demand stimulus package of Rs 73,000 crores. This programme was for the government employees who were given the benefit of a leave travel concession (LTC) cash voucher scheme and special festival salary advance.
2. New Dynamism in Agriculture
This sector contributes about 14 to 15 per cent to GDP and has remained largely affected by the damage caused by the pandemic. Agriculture ad recorded a growth rate of 3.4 % in the first quarter (April-June) of 2020 despite all disruption. the government of India formulated three ordinances on June 5, 2020, which relates to agriculture. The Farmers Agreement on Price Assurance and Farm Services Act, 2020, which is dedicated legislation to enable contract farming based on written agreements. The Farmers’ Produce Trade and Commerce Act, 2020, liberates farmers by giving them the freedom to sell anywhere. The Essential Commodities Act, 2020, has the objective of restricting the conditions on which the government can impose a stock limit on agricultural produce. India’s exports of agricultural commodities surged by 43.4 per cent in the first half (April to September) of 2020-21. In 2020-21, the farm exports figure increased to Rs 53,626 crores.
3. Cascading Foreign Investments
India has been a preferred destination for foreign investors for a long time. The recent upsurge inflow of funds into the country is quite remarkable and encouraging. The public investments fund of Saudi Arabia had announced on June 18, 2020, that it will invest one and a half-billion dollars in Jio platforms (the digital arm of Reliance Industries Limited) for a 2.32% stake. On July 15, 2020, Google announced that it will invest four and a half-billion dollars in Jio platforms to claim a 7.73 per cent stake. Google further on July 13, 2020, had announced that it will invest 10 billion US dollars for developing digital infrastructure and funding innovations in India for the next five to seven years. Apart from the large size of the market, India has alternately discredited China and further has a realistic exchange rate policy, sufficient foreign exchange reserves and low external debt.
4. Startup Hub
In the Global Startup Ecosystem Report (GSER), 2020, released on June 25, 2020, by California-based Startup Genome in which two Indian cities made it to the top 40 of the World’s most favourable ecosystems to build a globally successful startup. Banglore was ranked 26th and Delhi on 36th rank. Mumbai has topped the list of emerging ecosystems. India has improved remarkably in recent years on world indices of ease of doing business, innovations, digital payments, logistics, and travel and tourism.
IF India cannot become a five trillion dollar economy by 2024. Then why?
- India cannot achieve its aspirational goal of becoming a five trillion dollar economy by 2024. Only if it sustains a growth rate of about nine per cent annum as per C Rangarajan, former Governor of the Reserve Bank of India.
- According to his keynote at BusinessLine’s Budget Count Down event, he said that five trillion dollars are a good aspirational goal. But he requests to understand that a five trillion dollar economy in a matter of five to six years can not be possible to achieve. Only if the economy grows in a sustained way between eight to nine per cent. It has to be closer to nine per cent as India’s today’s economy is 2.7 trillion dollars. So five trillion dollars means the double size of the current economy.
- Rangarajan who was also the Chairman of the Prime Minister’s Economic Advisory Committee during the UPA regime had observed that the country is nowhere near the goal as per IMF (International Monetary Fund) forecast, India’s GDP (Gross Domestic Product) growth in 2020-21 and 2021-22 is expected to be 5.8% or 6.5%, respectively.
- Rangarajan further said that he must say that even if India reaches five trillion dollars economy still India’s per capita income will be only about $3,600, up from today’s $1,800 crores. India then still would be described as a middle-income country. If the country really aspires to become a developed country, which means a per capita income of $12,000, it might take 22 years from now on if the country grows at a sustained rate to eight to nine per cent per annum.