After re-election to power via a landslide mandate, the Modi government has made its mission to double the size of Indian economy within the next 5 years. But, is it achievable?
Modi 2.0 government is keen on catapulting India to a 5 trillion economy by 2025. While PM Modi has been vocal about achieving the ambitious goal on various platforms like NITI AAYOG’s governing council meet 2019 and World Economic Forum’s annual event earlier in 2018, the Finance Minister, Nirmala Sitharaman, categorically echoed similar sentiments in her maiden budget speech. Per the budget news 2019, doubling the GDP within the next five years is a tall ask, given the mounting fiscal deficit and slow down the Indian economy is experiencing lately.
To put everything in perspective, let’s consider some stats. The present size of the Indian economy is $2.67 trillion while it was $1.85 trillion in 2014, at the start of Modi’s first stint in the office. Within 5 years, the economy’s size was up by $0.82 when the annual growth rate was a healthy 8% annually. If the economy has to grow twice its current size within the next 5 years, a higher annual growth rate, preferably in double figures, is needed. So, how realistic is the goal of a 5 trillion dollar economy in such a short time frame? Let’s discuss.
Per PM Modi, the Indian economy is not walking but running. His focus is on doubling the per capita income, which will lead to a higher purchasing power and rise in demand, reported Dainik Bhaskar Plus, a top-rated newspaper app. The rise in demand is supposed to drive the manufacturing and services sectors, which in turn will create more jobs and steer India towards the socialistic goals of equitable growth, and health and education for all. The overly simplistic vision has to be backed by strong, impactful long term policy initiatives to reverse the economic slowdown before it gains criticality, reduce the fiscal deficit and ensure inclusive growth.
Now, it all boils down to providing impetus to infrastructure development at scale and the Union budget 2019 has allotted Rs 100 lakh crore to this end. That’s a huge leap on infrastructure development spending, up from the present Rs 7 lakh crore to Rs 20 lakh crore in the next five years. As the breaking news in Hindi has it, a major chunk will go to upgrading the rural roads, and building national highways at unprecedented speed, nationwide. The “Housing For All” mission is also prioritized in the budget, as the government will build 19.5 million affordable houses by 2022. Scheme to ensure piped water is also in the pipeline.
The investment logjam and farm distress have been a fact of life for the Modi 1.0 government. The first budget after re-election aims to better up the previous performance, it seems. Rs 70,000 crore has been allotted to re-capitalize banks while Rs 1 lakh crore will be utilized to revive the NBFCs reeling under financial stress. There’s been an allocation of Rs 70,000 crore under the income support program for distressed farmers while the separate amount will be spent on fast-tracking irrigation projects, promoting the next phase of blue revolution.