Indian Five Trillion Economy Plan: Real vs Hallucination

 Indian Economy Over The Last Two Decades: 

          

               In the year of 1991, the Indian economy reached GDP of U$D one trillion. India initiated economy reforms in the year of 1991 by the government of Narashima Rao and finance minister Manmohan Singh. The reforms did away with the Licence Raj, reduced tariffs and interest rates and ended many public monopolies, allowing automatic approval of foreign direct investment in many sectors. By the turn of the 21st century, India had progressed towards a free-market economy, with a substantial reduction in state control of the economy and increased financial liberalization. This has been accompanied by increases in life expectancy, literacy rates, and food security, although urban residents have benefited more than rural residents.

India experienced high growth rates, averaging 9% from 2003 to 2007. Growth then moderated in 2008 due to the global financial crisis. In 2003, Goldman Sachs predicted that India's GDP in current prices would overtake France and Italy by 2020, Germany, UK and Russia by 2025 and Japan by 2035, making it the third-largest economy of the world, behind the US and China. India is often seen by most economists as a rising economic superpower which will play a major role in the 21st-century global economy. 

Starting in 2012 India entered a period of reduced growth, which slowed to 5.6%. Other economic problems also became apparent: a plunging Indian rupee, a persistent high current account deficit and slow industrial growth. India started recovery in 2013–14 when the GDP growth rate accelerated to 6.4% from the previous year's 5.5%. The acceleration continued through 2014–15 and 2015–16 with growth rates of 7.5% and 8.0% respectively. For the first time since 1990, India grew faster than China which registered 6.9% growth in 2015. However the growth rate subsequently decelerated, to 7.1% and 6.6% in 2016–17 and 2017–18 respectively, partly because of the disruptive effects of 2016 Indian banknote demonetization and the Goods and Services Tax (GST). 

India is ranked 63rd out of 190 countries in the World Bank's 2020 ease of doing business index, up 14 points from the last year's 100 and up 37 points in just two years. In terms of dealing with construction permits and enforcing contracts, it is ranked among the 10 worst in the world, while it has a relatively favourable ranking when it comes to protecting minority investors or getting credit. The strong efforts taken by the Department of Industrial Policy and Promotion (DIPP) to boost ease of doing business rankings at the state level is said to impact the overall rankings of India.

Can India Reach 5 trillion Economy By 2024:

             

              After demonetization in 2016 the Indian economy started taking the u - turn from the growth rate. The idea and objective of demonetization was right but the ineffective and quick execution made it wrong. The idea of bringing out black money went wrong and almost more than 99% cash returned to the bank. The co-operate sector started to suffer in late 2016. The lower class were suffered for basic needs due to low cash circulation in the economy.

The co-operate sector has to suffered from the policy of GST. The problems like highest unemployment rate in decades, poor liquidity ratio and poor conditions of nation co-operates like IL&FS and DHFL. 

After winning the second election of 2019 with the bigger margin than previous, PM Narendra Modi's second term began with problems like low economic growth rate, liquidity crisis, several scams, deterioration of public banks, agricultural sector distressed, decline in exports, high unemployment rates and general recessionary  condition.

Under the new financial policy government has targeted five trillion economy by 2024, same year the second term of Narendra Modi will end as the prime minister. If we take the ground reality and past economic data into consideration, the target is seems to unlike achievable. In the year of 2013 the size of Indian economy was $1.88 trillion and current economy size is about $2.8 trillion which is about 45% of increment over the six years. In order to reach $5 trillion India needs  almost 85-90% increment in the economy in next 4 years which seems very hard with current economic growth rate.

To be the winner in the race of $5 trillion economy the Compounded Growth Rate(CAGR) needs to be over 13% until 2024. To consistently maintain double digits economic growth rate, not only domestic economy to be good but also a big push from the global economy. But the both economic condition domestic and globally are at the poor condition. 

In a interview by 'The Quint' Subramanian Swamy(MP,BJP) said "Goodbye to  5 Trillion Economy". He said - " Get ready to say good bye to $5 trillion economy if no new economic policy is forthcoming. Neither boldness alone or knowledge alone can save the economy from a crash. It needs both. Today we have neither".   

C Rangarajan, former RBI Governor said -“$5 trillion is a good aspirational goal. But please understand that a $5-trillion economy in a matter of 5 to 6 years cannot be achieved unless the economy grows in a sustained way between 8 and 9 per cent. It has to be closer to 9 per cent because today the Indian economy is $2.7 trillion. So, $5 trillion means almost doubling the size of the economy. And that is possible only if the economy grows at 9 per cent per annum in a sustained way for 5 to 6 years.” in a interview by 'Hindu Business Online'.

The $5 trillion economy aim by the year 2024 is a “bit aspirational” but “eminently feasible”, said Chief Economist, Axis Bank, Saugata Bhattacharya.      

It seems very hard to achieve $5 trillion economy and Covid-19 has put more difficulties. Comment below whether India can achieve $5 trillion economy and how & why?

Thank you!!!

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