By K Raveendran
The BJP’s 2019 manifesto had envisaged Indian economy hitting the $5 trillion mark, an audacious goal, that was to be achieved on the strengths of tax reforms, infrastructure development, and job creation. As the nation approaches the deadline, the party has moved the goal posts further ahead, now promising to achieve the status of the world’s third largest economy by 2029, that is by another term of the Lok Sabha.
Probably, fatigued by the talk of $5 trillion economy, the manifesto has this time talked about the goal of emerging as the third biggest economy of the world, which in essence means saying the same thing differently. Japan, which India is aspiring to replace, has a GDP, according to current estimates of 4.2 trillion and a PPP-adjusted size of $5.7 trillion. So more or less, it corresponds to the 2019 target. To say India failed to make it would be an understatement as the dream just flickered but not ignited. The ‘Make in India’ campaign had sputtered, and the ‘Digital India’ vision had faced glitches.
India’s economic rise has become a topic of global fascination. The new target also rests on a complex interplay of factors, presenting a path paved with both potential and peril.
One of India’s biggest advantages is its demographic dividend. The country boasts a massive young population, with over 65 percent falling under the age of 35. This translates to a readily available workforce, a crucial factor for driving economic growth. A young population also fuels domestic consumption, creating a larger market for businesses to tap into. This demographic advantage is expected to last for several decades, providing India with a long runway for economic expansion.
Infrastructure development, investing heavily in roads, railways, and ports to improve connectivity and facilitate the movement of goods and people, is progressing apace. Additionally, digitalization efforts are underway, with a focus on initiatives like Digital India to improve internet access and government services. These reforms, if successful, could streamline business operations, attract foreign investment, and create a more competitive economic environment.
The State Bank of India (SBI) predicts that India’s consistent growth rate, currently exceeding 7 percent, will propel it past economic powerhouses like Germany and Japan in the coming years. This optimism stems from the belief that the aforementioned reforms, coupled with the demographic advantage, will create a virtuous cycle of economic activity.
Despite the positive outlook, however, there are significant hurdles on India’s path to economic superstardom. One of the biggest concerns is income inequality. While the economy is growing, the benefits are not evenly distributed. A vast segment of the population still lives in poverty, particularly in rural areas. This not only creates social unrest but also limits domestic consumption, hindering economic growth.
Another challenge is rural stagnation. While the urban centres are booming, rural areas continue to lag behind. This creates a disparity in development and limits the ability of a large portion of the population to contribute to the national economy. Bridging this gap is crucial for inclusive and sustainable growth.
The regulatory environment is also a point of contention. Critics argue that a complex web of regulations discourages investment and stifles innovation. Streamlining regulations and creating a more business-friendly environment would be essential to attract and retain domestic and foreign investors.
Beyond domestic challenges, external factors also pose significant risks. The global economy is currently grappling with rising inflation, which could erode India’s growth prospects. Furthermore, geopolitical tensions, such as the ongoing war in Ukraine, can disrupt supply chains and increase the cost of essential commodities like oil and gas, further impacting India’s economic stability.
Some analysts believe a more realistic timeframe might be the early 2030s. This acknowledges the challenges that need to be addressed and allows for a more measured approach to economic development.
There is no doubt that the coming years will be a critical test for the Indian economy. Its success hinges on its ability to address internal roadblocks like income inequality and rural stagnation, while simultaneously navigating the uncertainties of the global economic landscape. If India can capitalize on its strengths, particularly its young population, and implement effective reforms, the title of the world’s third largest economy might well be within reach by the end of the decade. However, achieving this ambitious goal will require a concerted effort from the government, businesses, and the population as a whole. India’s economic future will depend on its ability to overcome these challenges and translate its potential into sustained and inclusive growth. (IPA Service)
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