Prime Minister Narendra Modi claimed to make India a 5 Trillion dollar economy by 2024 during his second term in May 2019. The government aimed to make India economically strong and free from poverty, but due to this, pandemic and lockdown, India witnessed a fall in GDP. Even before the pandemic, economists suggest that it is impossible to achieve the $5 Trillion economy by 2024. There was a slowdown in the growth rate of the economy in 2019-20 which was much lower than the double-digit growth rate required to achieve the target and the pandemic situation has made the situation even worse with the economy contracting in the current fiscal year.
Now the question arises, Will India be able to achieve a $5 Trillion Economy by 2024?
In 2019-20 the total size of the Indian economy was 2.7 trillion dollars but due to the pandemic, India witnessed a negative growth rate and now to achieve this figure of 2.7 trillion dollars is possible only by the end of 2021, that is to achieve $5 trillion economy until 2024 would require a growth rate at 9% per annum.
Recently PM Modi spoke to Economic Times that he is confident of restoring the economy to $5 trillion by 2024.
It is difficult to achieve the goal but not impossible. India’s economic recovery will depend on how effectively the country will manage its infrastructure investment, relying on the financial system’s ability, like banks, to generate resources. In the current period, the banks are struggling with stressed assets. Therefore, they have reduced their capital base, which has harmed their ability to lend as the duration of borrowings is long.
India needs to increase its exports as a higher export growth rate is an essential factor in achieving 5 trillion dollars. The government has to decide whether to join the RCEP (Regional Comprehensive Economic Partnership) that is the free trade group of 10 ASEAN members and their six allies. India’s Exports need to be doubled from $500 billion at present to $1 Trillion.
By promoting exports, Free Trade Agreements (FTA) will help the country to move up. However, we have never gained from the existing FTA’s, but that is majorly due to the corruption and lax quality controls.
Restricting trade with China is not an option to increase growth in the economy because we require certain advanced technology for producing goods, and just cutting off them will harm both the countries.
The government needs to increase expenditure on the provision of public goods like health, education, etc. A current step in this direction is The New Education Policy, 2020. The public’s provision is necessary and improves the technological base by focusing more on Artificial Intelligence and Big Data.
Unsurprisingly, India falls well below its potential to attract Foreign Direct Investment (FDI), which is crucial for exports and increasing the economy’s growth rate, so the government needs to focus on that as well.
The pathway to a 5 trillion dollar economy is bumpy, but if the above reforms are taken into consideration, we will achieve this figure in the next 5 years.