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India to be a $5 trillion economy

Topics Covered:

  1. 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: Meaning of $5 trillion economy, about GDP.

For Mains: Challenges, concerns and ways to achieve the target.

 

Context: The road to a $5 trillion economy by 2025 is beset with many speed-breakers, the NITI Aayog has warned the government.

 

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). 

 

What it needs?

  1. 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.
  2. It also means improving all three sectors of the economy, India will more likely achieve its ambitious Sustainable Developmental Goals (SDGs).

 

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.

 

Challenges that need to be addressed:

  1. Under-employment and the disguised employment.
  2. Slowdown in agriculture.
  3. Slow pace of infrastructure development in the last decade.
  4. Funding issues.
  5. Exports issues.

 

Sources: the Hindu.