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India to be a $5-trillion economy

Topic covered:

Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

India to be a $5-trillion economy

 

What to study?

For prelims and mains: India’s present state and what needs to be done to achieve the targets?

 

Context: The government has announced that its main goal is to make India a $5-trillion economy by the end of this term.

 

Present state:

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

Essentially the reference is to the size of an economy as measured by the annual GDP.

 

Are Indians the sixth-richest people in the world?

No. That India is the sixth-largest economy does not necessarily imply that Indians are the sixth-richest people on the planet.

GDP per capita gives a better sense of how an average resident of an economy might be fairing. It reveals a very different, and indeed a more accurate picture of the level of prosperity in the respective economies.

For instance, on average, a UK resident’s income was 21 times that of an average Indian in 2018.

Still, the richest 1% of Indians own 58.4% of wealth. The richest 10 % of Indians own 80.7 % of the wealth.

 

Can India achieve the target by 2024?

The answer would depend essentially on the assumption about economic growth.

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. India must keep growing at a rapid pace to attain this target.

 

How will GDP per capita change when India hits the $5-trillion mark?

If by 2024 India’s GDP is $5.33 trillion and India’s population is 1.43 billion (according to UN population projection).

India’s per capita GDP would be $3,727.

This would be considerably more than what it is today, still it will be lower than Indonesia’s GDP per capita in 2018.

 

Sources: Indian Express.