India’s Target of $5 Trillion Economy

In News

• India aims to achieve the target of a $5 trillion economy by 2025 & $10 trillion by 2033-34.
  • We are now $3.3 trillion as per the data.

More about the news

• There are mixed opinions about India’s economic potential for target achievement.
• A study conducted by the National Council of Applied Economic Research (NCAER) shows that the targets are easily attainable by following the bottom-up approach recommended by the Department of Promotion of Industry and Internal Trade (DPIIT).
• Way to achieve the target:
  • District as a primary unit:
    • A working group constituted by DPIIT proposed to treat districts as the primary unit for planning and policy interventions so that they contribute to the accelerated growth of the Indian economy. 
    • Prepare strategies for the districts centred around their local strengths and economic activities.
  • Local communities & resources:
    • NCAER notes that local communities and resources hold the key to India’s economic growth. 
  • The working group has identified four key areas that can help fast-track the economic growth of districts: 
    • Finding potential sectors of growth; 
    • Implementing actions, such as assessing capacities of the district and identifying potential investors and sites for undertaking growth activities; 
    • Offering support to the district development unit as well as recommendations for course correction; and 
    • Sharing the findings with local communities or the target groups.
  • Other schemes:
    • These areas of economic growth can then be implemented by leveraging existing central- or state-sponsored government schemes, notes NCAER.

Possible Challenges

• Former RBI Governor C Rangarajan recently said that India’s aim to become a $5 trillion economy by 2025 is ‘impossible’ due to the pandemic.
  • Economic activity had come to a grinding halt due to the lockdown imposed to prevent the spread of COCID-19.
  • Not easy to reach $5 trillion by 2024-25 with present Real Gross Domestic Product (GDP) is only close to $2 trillion
• The World Bank has cut India’s economic growth forecast for the current fiscal to 7.5% as rising inflation, supply chain disruptions, and geopolitical tensions taper recovery.
• Other Factors: Threat of rising inequality, Possibility of egregious consequences in trying to achieve growth etc.

More ways to achieve the target

• Growth & reforms:
  • In order to achieve the USD five trillion economy, growth which is the answer to many socio economic problems should become the undivided concern of the government and equity which is equally important will be a distant dream unless high growth spurred by reforms support it.
• Growth for recovery:
  • India needs a faster growth rate to make up for the loss of output in the previous two years from the trend rate and must lay the foundation for faster growth in this year itself.
• Increasing expenditures:
  • As revenues improve, expenditures can be increased even as there is no need to reduce the fiscal deficit below the budgeted level of 6.8 percent of GDP
• Manufacturing sector:
  • A key channel through which the manufacturing sector could be rejuvenated is by increasing the number of countries participating in Global Value Chains (GVCs).
  • There is a need for dedicated efforts to narrow the knowledge gap.

Way Ahead

• Deep and wide-ranging structural reforms in the financial sector, power & foreign trade are the need of the hour. 
• Also, reforms in cooperation with the states are also urgent in health, education, labour and land, which are all primarily state subjects.

Source: TH