India to be a $5 trillion economy
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?
- 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.
- 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:
- Under-employment and the disguised employment.
- Slowdown in agriculture.
- Slow pace of infrastructure development in the last decade.
- Funding issues.
- Exports issues.