India Dreams of a 5 Trillion Dollar Economy: is it a Myth or Reality? Economy: is it a Myth or Reality?
ECONOMY /
K.Venkateshwar.
Rao
12 AUGUST 2019
12 AUGUST 2019
With the country’s
unemployment rate rising to a 45-year high at 6.1% in 2017/18 fiscal year,
slowdown in the agriculture growth rate, and declining GDP growth rate, can
India achieve the great Indian dream of a 5 trillion US dollar economy by 2024?
Reports of slowdown in the global economy cast a shadow on the government’s
target. Whereas the Annual Report 2018-19 of the Department for Promotion of
Industry and Internal Trade (DPIIT), states that India has received the
highest-ever FDI inflow of $64.37 billion during the fiscal ended March 2019
and FDI worth $286 billion in the past five years. This presents India as a
bright spot for investment and vindicates the governments target of USD 5
trillion economy by 2024. Economists and subject matter experts termed the
target as ambitious but achievable with reforms and a higher growth rate.
Chief economic advisor
to the government of India, K V Subramanian said, “Even though the target looks
ambitious, it is realistic and achievable considering notable successes in all
domains of governance in the last five years.” Addressing assistant collectors
and senior officers at Dr. MCR HRD Institute in Hyderabad, Prof. Subramanian
said that investments and the GDP growth of 8% per annum would be the key
driver in reaching the $5 trillion economy by 2024. He also reflected that
India took 55 years to reach the first trillion economy mark and then grew
rapidly and reached $ 2.7 trillion in the last five years
(2014-2019).
Prof Subramanian said
that many enterprises prefer to stay small to derive the benefits of government
incentives, as a result, their growth is lower than their real potential. Prof.
Subramanian pointed out that larger firms can generate more employment
opportunities in the long run, while the micro, small, and medium enterprises
may become less impactful in generating employment.
Talking to InsideOver,
Dr. SP Sharma, Chief economist, PHD Chamber of Commerce and Industry (PHDCCI)
said, “With an anticipated GDP growth rate of 8% India can achieve the 5 trillion
dollar target even if we take into account the inflation rate of 4%. Dr. Sharma
said his logic is based on the government’s announcement of spending INR 100
lakh crore on infrastructure over the next five years. Infrastructure spending
produces a multiplier effect on economic growth and enhances GDP growth by 1%.
For better results, the government needs to spend INR 20 lakh crore on
infrastructure each year over the next five years. On agriculture slowdown, Dr.
Sharma is hopeful that the agro sector would revive and increase its
contribution in GDP. The government is working on supply chain and developing
infrastructure facilities; with a check on wastage and development of
irrigation facilities, farmers’ income will increase in the coming years.
A Delhi-based
economist, who was an Economic Advisor to the Ministry of Finance, Department
of Economic Affairs, India and the International Monetary Fund, said that the
target is achievable with sustained economic growth. The government’s focus on
development programs and upliftment of poor coupled with the various economic
reform programs, like the GST, the Insolvency and Bankruptcy Code 2016, and
others, will result in INR 5 trillion dollar economy. The only concern is
whether India can sustain that growth rate or not. He added, “India’s GDP was
higher than China in 1980, but they are now four times than India as China
began growing rapidly at annual rates of more than 8% per year. We can become a
5 trillion dollar economy by doing the same.”
India Dreams of a 5 Trillion Dollar Economy: is it a Myth or Reality? Economy: is it a Myth or Reality?
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