A Roadmap Towards US $5 trillion Economy in 2025

A Roadmap Towards US $5 trillion Economy in 2025: A fallen Angel or Poised to Soar!

1* Dr.Rahul Sadashiv Kharat,

1. Assistant Professor, M.S.K.College, Someshwarnagar, Tal-Baramati, Dist-Pune, Pin-412306.

*Email id of corresponding Author: - srass229@gmail.com

Introduction:

Indian economy is one of the fastest growing economies in the world and ranked as six largest economies. It has one of biggest market in the world for all kind of products and services produced worldwide. At the same time it has maintained fiscal discipline after 1991 economic crisis and wins the confidence of all developed economies of the world including Euro group of countries.

As compare to the GDP of April-September 2017-18 (i.e. 62.97 lakh crore), the GDP of September 2018-19 was estimated to 67.71 crore as per the base year 2011-12 price records showed growth rate of 7.6%. The GDP at current prices was also estimated to Rs.89.87 lakh crore during April-September 2018-19 reflects growth rate of 12.8% over the growth rate during the previous year corresponding period. At the same time efforts of Government of India towards accelerating steady development are continually increasing with the sense of dynamism.  The estimated Sectorial growth is also positive and shows favorable changes which can meet requirements of target decided. The following table shows the estimated Sectorial growth and GDP to achieve target of US 5 trillion economies by 2024-25:

Table 1.1 Estimated Sectorial growths.

Sector	GDP in 2017-18		Projected GDP 2024-25
	Value at current prices (Rs. in crore)	Share in GDP	Value at current prices (Rs. in crore)	Value at current prices (US$ billions)	Share in GDP	Required normal Growth rate
GDP	16773145	100	36000000	5000	100	11.7
GVA* for Agriculture	2594729	17.1	5040000	700	14	10.1
GVA* for Manufacturing	2530311	16.8	6480000	900	18	14.6
GVA Services	8176002	53.9	19800000	2750	55	13.7
*GVA: Gross value added.
Note 1: Average exchange rate of Rs. 72/- for US $ 1 has been used for the calculations.
Note 2: Construction, Mining and Electricity department share assumed to remain constant between 12 to 13 per cent of the GDP.

Source: Department of Industrial Policy and Promotion, Ministry of Commerce & Industry, GOI.

The above table 1.1 shows that the current share of Agriculture sector & its allied activities is 17.1% of total gross value added which is approximately US $ 402.50 billion (Value in rupee is Rs. 25,94,729 crore) and expected to grow to the 14% by 2024-25 (i.e. Rs. 50,40,000 crore and equal to US$ 700 billion).

The current share of Manufacturing sector is 16.8% of total gross value added which is approximately US $ 390 billion (Value in rupee is Rs. 25, 30,311crore) and expected to grow to the 18% by 2024-25 (i.e. Rs. 64, 80,000 crore and equal to US $ 900 billion).

The current share of Service sector is 53.9% of total gross value added (Value in rupee is Rs. 81, 76,002 crore) and expected to grow to the 55% by 2024-25 (i.e. Rs. 1, 98, 00,000 crore and equal to US $ 2750 billion).

Considering the data given in above table no.1.1 target of growth of US $ 5 trillion economy is achieved from these three sectors by following way:

Table 1.2: Sectorial Contribution to GDP (in US $)
Sector	Agriculture & Allied Activities	Manufacturing	Services
Contribution to GDP in US$	1 trillion	1 trillion	3 trillion

 The above table 1.2 shows that the roadmap of three sectors of Indian economy, who contributes to achieve target of US $ 5 trillion by 2025. Out of these three sectors Service sector will have to contribute US $ 3 trillion whereas Manufacturing and Agriculture sector with its allied will contribute US $ 1 trillion each to the target.

The above picture of the target goal gives us strength to contribute to the growth and development of nation but at the same time when we speak about our strength as a nation we have lot of strength, opportunities, weaknesses and threats also. Being a crusader in the new dynamic era of globalization, we need to concentrate on SWOT analysis while moving towards target.

Strength and opportunities as a nation:

Indian economy is one of the fastest growing economy and contributing to the world development by all the possible ways. This contribution can be said as a strength and opportunities of nation and discussed below:

1. India is one of the highly populated countries of the world followed by China. In 2030, India will be ranked top in population. In 2020, India will be ‘young Bulge’ with average age of population will 29 years. By 2035 it has more than 40% population between age group 28-35 years. So, it has strength to provide quality human capital to nation as well as world. Most of the western countries and developed EURO nations have negative or zero rate of child birth. So they have a need of quality human capital to handle their day today affairs. India has a chance to become top quality human capital provider in all sectors of development worldwide.
2. India is the world’s largest & fastest growing economy and currently ranked as the sixth largest economy. With this growth, its commitment to fiscal discipline, increasing FDI inflows, efficiency in providing services, sound external position, comprehensive structural reforms and improvement in Global Competitiveness & Innovation Index attracts to the world investors to contribute the overall development of India.
3. The IMF projects that India would reach GDP (at current prices) of US $ 4.60 trillion by 2022-23.  GDP growth of India was 6.7%, 7.3% and 7.4% in 2016-17, 2017-18, & 2018-19 respectively and same will continually increase till 2023. According to predeterminations of Morgan Stanley, “GDP of India could reach US $ 6 trillion in 2027, if they continued on the same path.
4. Government of India has launched “Make in India Campaign”, on 25th September 2014, is a major national initiative which covers 25 sectors with ability and capacity to make India as a global manufacturing Hub. The campaign aims to achieve target of manufacturing growth to 10%.  Campaign works hard for introducing a business friendly regulatory environment, enhancing the ease of doing business and improving manufacturing infrastructure, and many more things to boost manufacturing services.
5. Considering the efforts of Government of India, the potential to achieve target of US $ 5 trillion economy by 2024-25 is within the sphere of possibility.  
6. With the fourth industrial revolution, the industrial landscape has been drastically changed with the new innovations like artificial intelligence, robotics, big data block chain etc. helped to build on the backbone of digitization, are fast changing manufacturing. It has also been changed the dynamics of the market with the emergence of innovative business models. Innovative business model has bifurcated irrelevant and traditional services from their manufacturing.
7. Sector wise projection shown in above table no.1.1 is not impossible after considering above strength and challenges.  

Weaknesses and challenges as a nation:-

Knowing all our strength and opportunities does not mean that you will reach safely towards your pre-decided goal. Going towards goal is not that much easy as we think. There are many hurdles in the path of success. These hurdles are popularly known as challenges. To overcome on these challenges we should aware about our weaknesses first. As a nation India has many weaknesses and challenges ahead in the path of development. These weaknesses and challenges are discussed below:

1.            India is an agrarian economy. Till today it is a backbone of rural Indian economy and more than 57% population is depends on Agriculture and it’s allied activities. Agriculture sector provides all kind of raw material to manufacturing sector. So, goal of US $ 2 trillion GDP out of US $ 5 trillion GDP is depends upon agriculture. Toady Indian agriculture sector facing lot of problem like capital, increase in expenditure,  low productivity, unfavorable weather condition, water and soil pollution,  high cost of seeds, fertilizer, and manures, fall in market due to heavy supply, reduction in government subsidy, status of farmers and farm, losses in allows activities. Small pieces of land, heavy burden on agriculture due to unemployment in manufacturing and services sector. So, the performance of agriculture sector is below the par requirement of GDP. Agricultural economists and expert's in the field says that, the current year actual contribution of agriculture sector to the GDP is reduced to 1.9% from 2.2% of subsequent year. There is no chance in the improvement in the situation in next two years. In addition to the same, government decisions like demonetization and improvements in direct tax legislature badly affects on rural economy, framers and small and medium entrepreneurs’. Even though central government denies, there is total failure of demonetization and GST reforms and cannot be neglected.

2.            Indian manufacturing sector is not doing well in current situation. To run economic cycle successfully there should be new investment in the manufacturing sector. Investment (either FDI or FII or both) helps for installation of new units in the manufacturing sector and creates lot of opportunities to many avenues of development like employment, raw material, processing and by products units, sales & promotion and many more. Now a day’s Indian manufacturing sector going through recession. The demand for most of the manufacturing goods is continuously decreasing. Market share of top companies is slashed down to half as compare to subsequent year. Most of the companies started labor and employee retrenchment and lay off for cost cutting. There is no demand for electronic goods and luxury products even after reduction in the price up to 20% to 40%. Most of the construction companies facing heavy losses due to no demand for flats and row houses in the major cities. Government owned and public companies financial performance is very poor and most of them are with re at the stage of liquidation or disinvestment. Central and state governments are not capable to provide capital or make investment in such project and concentrated on disinvestment in public sector industries and units.

3.            Service sector plays vital role in growth and development. It contributes more than half to the GDP of the nation. More than 60% employment of the nation provided by service sector by way of more than 28 major services. But most of the investment either by way of FDI or FII comes in service sector. So, maximum portion of the revenue earn by service sector goes to the foreign investors by way of dividend and interest. Due to the economic slowdown worldwide, current policies of government and internal unrest investors are not willing to invest in India. So, flow of FDI & FII is considerably reduced in last three quarters as compare to subsequent year’s inflows. Most of the foreign investors withdrew their investment due to particular state government’s policies and decision. Supreme Court decisions also badly affects on foreign investment.

4.            The banking sector of India is in trouble due to increasing NPA. Most of the business houses are not able to repay the loan taken and at the stage of declaration of insolvency. Their debts are increasing continuously with increasing losses. So economic cycle is at the stage of collapse. RBI also increased restrictions on banks, to sanction loans. In last quarter CRR and REPO rate are remain unchanged.

5.            Central government doesn’t have funds for investment, relief packages and to meet the expenditures of welfare schemes. So, they withdrew 70% corpus of RBI to meet their expenses. All funding for infrastructure projects has been stopped due to unavailability of funds with government.

6.            Government brought GST under “One Nation, One Tax” scheme to simplify tax structure and to increase in tax collection. But even after two years of implementation tax collection target is not yet achieved and deficit of government is increased.

7.            Government scheme like MUDRA Bank, Start up, Skill India fail to show positive result till today.

8.            India has a heavy competition from countries like China, USA, Japan, Korea and Germany for quality products and services. We are not yet capable to reach at their level in terms of quality, quantity and price of the products and services. 

Considering all above factors, we can say that the central government trying hard with sincere efforts to achieve the pre-decided goal to became a one of the financial super power of the world. But we have more challenges and threats than opportunities and strength. So, target decided may cross 2025 and we may achieve the same in 2030, with proper planning, strategies and policies.

References:

1.      PhD Research Bureau, (2018), Rural India: Road to US $5 Trillion Economy, PhD Chamber of Commerce & Industry, New Delhi, pp.3-7.

2.      https://dipp.gov.in/policies-rules-and-acts/notifications

3.      https://dipp.gov.in/policies-rules-and-acts/policies/industrial-policy

4.      http://statisticstimes.com/economy/sectorwise-gdp-contribution-of-india.php

5.      https://economictimes.indiatimes.com/news/company/corporate-trends/industry-captains-discuss-road-map-for-5-trillion-economy/articleshow/72917249.cms

6.      https://www.businesstoday.in/opinion/columns/indian-economy-five-trillion-dollar-narendra-modi-green-perspective-gdp/story/377981.html

7.      State of the Economy in 2018-19: 01 A Macro View, http://www.indiabudget.gov.in

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