How India can become 5 trillion economy

How India can become 5 trillion Economy

Introduction

If we look at the last 5 years of India's economy, on an average, India has grown at about 7.5%. Growth in recent times has dipped. 

But whether it's cyclical or structural is the question. The challenge for India is really to grow at high rates over a 3-decade period. It's not just about a $5 trillion economy till 2024, or a $10 trillion economy by 2030. The challenge for India is to grow at 8% to 9% per annum, year after year, for three decades or more.

·         Prime Minister had announced the target of a $5 trillion economy for India by 2024. This will make India the third-largest economy in the world.

·         The focus of plans will be on boosting services sector contribution to $ 3 trillion, manufacturing to $ 1 trillion and Agriculture to $ 1 trillion.

What is a $5-trillion economy?

·         Essentially $5-trillion economy is the size of an economy as measured by the annual Gross Domestic Product (GDP).

·         The GDP of an economy is the total monetary value of all goods and services produced in an economy within a year.

·         GDP is a way among countries (economies) to keep score about who is ahead.

·         In 2014, India’s GDP was $1.85 trillion. In 2018, it is $2.7 trillion and India is the sixth-largest economy in the world.

·         Apart from the monetary definition, a $ 5 Trillion Economy calls for pulling all the economic growth levers—

    Investment, consumption, exports, and across all the three sectors of agriculture, manufacturing and services.

·         It also means improving all three sectors of the economy, India will more likely achieve its ambitious Sustainable Developmental Goals (SDGs).

·         By attaining double-digit growth, India has little hope of employing the roughly one million young people. 

    Favourable demographics will emerge as an upper-middle-income economy with a prosperous and thriving middle class.

Characteristics of a valuable economy

The economy must be evaluated in terms of how much it contributes to the ease of our living. So following are some of the characteristics of a valuable economy.

·          Empowered by the economy.

 India is placed very low in the United Nations’ World Happiness Report. Happiness is related to being educated and experiencing good health. So, the first attribute of the valuable economy would be access to quality health and education for all.

·         Equality of opportunity.

According to some measures, India is today more unequal than China, itself a society widely perceived as highly unequal, which is related to unequal distribution of income, gender inequality and sex ratio, already unfavourable to women. Inequality in India can only be ended by equalising capabilities across individuals. Concerted public action via education is the means to this outcome.

·         Global Multi Poverty Index

India has lifted 271 million people out of poverty between 2006 and 2016. But still it remains a major issue. As $ 5 Trillion economy is accompanied by job growth, equality of opportunity and better health and education, it will indirectly improve the status of social inequality.

Steps Taken by Government

#1. Increase ease of business and ease of living to enable the private sector to create wealth over a long period of time.

Over the last four years, the government has scrapped a number of laws; over 1,300 to be precise. We've done away with a lot of procedures, rules and regulations. We've tried to digitize the Indian economy. We've tried to see that every single department of the government speaks to its applicants digitally. Through a series of reforms, India has jumped up 65 positions in The World Bank Ease of Doing Business.

 No other large country has been able to do this. We've jumped up 65 positions, but our challenge is that in the next two years we must reach the top 50 and in the next five years reach the top 25. 

The challenge is making it easy and simple at the state level and getting them to compete with each other in the spirit of competitive federalism. The first year we did this, on hundred outcomes of ease of doing business, Gujarat was No. 1. The next year, Andhra Pradesh, and the third year, Telangana. Backward states like Jharkhand and Chhattisgarh did massive reforms, huge reforms across labor, across a range of sectors to come fourth and fifth.

This spirit of competitive federalism - ease of doing business to health, education; and ranking states accordingly helps to make good governance as good politics, and puts out the data in public domain. There are about 115 districts of India which remain backward in parameters such as education, health, maternity, infant mortality, skill, agriculture and nutrition. Many of them are in the eastern part of India.

we capture their data on a real-time basis, and we make them compete on 49 indicators across education, health, nutrition, skill. By lifting these 115 districts above poverty line, India will automatically grow.

#2. Participation of women in the workforce is a key driver of India's growth.
India cannot grow at high rates over a 3-decade period without gender parity. In India, only 26% of the women work; the worldwide average is 48%. If such a major chunk of the population is not working and we consciously don't put women into positions of power, it will be very difficult for India to grow. 

We must give more opportunity to women consciously. And each one of us must ensure that women are put into position of power, so that India becomes a nation of gender parity. Without that, India will not grow. It's not possible. And if India was to reach that worldwide average of 48%, you will add $700 billion to your economy.

#3. Reforms in Agriculture.

It's not possible to grow over long periods of time without some very major structural reforms in the agriculture sector because that's where close to 58% of India lives. You can't keep growing on subsidies, you can't keep going on just giving assistance to farmers without ensuring better markets, without putting technology, without contract farming and so on. Agriculture sector reforms are critical.

#4. Primary Sector

·         The Government has several on-going initiatives across sectors focused on growth. In agriculture the Government is aiming to reorient policy focus from being production-centric to becoming income-centric.

·         The Commerce Ministry has formulated India’s first ever Agricultural Export Policy with a focused plan to boost India’s agricultural exports to $ 60 billion by 2022 thereby assisting the Agriculture Ministry in achieving its target of $ 100 billion and to integrate Indian farmers and the high quality agricultural products with global value chains and to double India’s share in world agriculture.

#5. Manufacturing Sector

·         The emphasis on incomes provides a broader scope towards achieving the needed expansion of the sector. The proposed Industrial Policy 2018 provides an overarching, sector-agnostic agenda for the enterprises of the future and envisions creating a globally competitive Indian industry that is modern, sustainable and inclusive.

·         Ministry of Commerce is making all efforts to ensure that in public procurement preference is given to Make in India. Its aim is to make India the hub of manufacturing, India has emerged as one of the fastest growing economies.

·         India has jumped 3 places on the Global Innovation Index from rank 60 in 2017 to rank 57 in 2018.

·         Start-up India is a flagship initiative of the Government of India, intended to build a strong ecosystem that is conducive for the growth of start-up businesses, to drive sustainable economic growth and generate large scale employment opportunities.

·         In Union Budget 2018-19, the Government of India reduced the income tax rate to 25 per cent for all companies having a turnover of up to Rs 250 crore.

·         Under the Mid-Term Review of Foreign Trade Policy (2015-20), the Government of India increased export incentives available to labour intensive MSME sectors by 2 per cent.

·         The Government of India has launched a Phased Manufacturing Programme (PMP) aimed at adding more smartphone components under the Make in India initiative thereby giving a push to the domestic manufacturing of mobile handsets.

·         The Government of India is in talks with stakeholders to further ease foreign direct investment (FDI) in defence under the automatic route to 51 per cent from the current 49 per cent, in order to give a boost to the Make in India initiative and to generate employment.

·         The Ministry of Defence, Government of India, approved the “Strategic Partnership” model which will enable private companies to tie up with foreign players for manufacturing submarines, fighter jets, helicopters and armoured vehicles.

#6. Service Sector

·         The Champion Services sector initiative is also under way to accelerate the expansion of select service sectors.

·         The 2019 Union Budget talks about plans with a pan-India focus to give a further boost to Sagarmala, Bharatmala and UDAN projects, besides the dedicated industrial and freight corridors.

·         The budget proposes further opening of FDI in aviation sector, media, animation AVGC and insurance sectors in consultation with all stakeholders. 100 per cent FDI will be permitted for insurance intermediaries.

FEASIBILITY OF BECOMING $5 TRILLION ECONOMY

·         If India grows at 12% nominal growth (that is 8% real GDP growth and 4% inflation), then from the 2018 level of $2.7 trillion, India would reach the 5.33 trillion mark in 2024.

·         But last year, India grew by just 6.8%. This year, most observers expect it to grow by just 7%. So India must keep growing at a rapid pace to attain this target.

·         The Economic Survey 2018-19 highlighted that international experience, especially from high-growth East Asian economies, suggested that such growth can only be sustained by a “virtuous cycle” of savings, investment and exports catalysed and supported by a favourable demographic phase.

·         Investment, especially private investment, is the key driver that drives demand, creates capacity, increases labour productivity, introduces new technology, allows creative destruction and generates jobs.

Investment in Human Capital

Skill

Skill india mission launches by Indian government to fulfill the growing need in india for skilled manpower across sectors.

Health

Ayushman Bharat Yojna started by Indian government, its aim to making interventions in primary, secondary and tertiary care system and second  main objective is to address healthcare holistically.

Education

Samagra siksha abhiyan , which includes  3 other schemes itself,

1. Sarva siksha abhiyan

2. Rashtriya Madhyamik siksha abhiyan

3. Teacher Education

 Basically the aim is to provide equal opportunity for schooling

Employement

Govt has increases the wages of MGNREGA for rural employment to boost up the rural domestic demand and improve livelihood opportunities for the poor .

Conclusion

As govt increased the investment in human capital formations and in other sectors. We  can also reap the benefits of our demographic dividends. Human capital is an important asset for the economy as it boosts domestic demand and consumption spending. If we connect all the dots of investment with   other sectors and Investing in human capital formation is critical for achieving the goal of $5 trillion economy.