A recently circulated background paper by the government has laid out the key factors required for India to become a $5 trillion economy.
The report says that “India is likely to become a US $5 trillion economy by 2026-27 if it grows at an average annual rate of 6.5 per cent with inflation below 5.0 per cent and US inflation closer to 3 per cent.”
India is expected to grow at 7.0 per cent this fiscal year as per the Asian Development Bank, thus outpacing the rest of the world.
The paper quoted forecasts by the International Monetary Fund (IMF) that India will become a $5 trillion economy in 2027-28.
“For this, India in real terms will grow at an average annual growth rate of 6.5 per cent in the next five years between 2023-24 and 2027-28. During this period, the IMF has assumed an average annual inflation rate of 4.7 per cent and the rate of depreciation of Rupee (₹) against the US Dollar at 2.1 per cent,” the report says.
The goal of a $5 trillion economy is one of the top priorities for the government and has generated much debate around when India would be able to achieve the target. The government had earlier set the target year of 2025, but the country lost two years of growth due to the pandemic.
While naysayers have predicted the goal being achieved by 2029, and even questioned whether it is worth it, forecasts by several global agencies say otherwise.
The McKinsey CEO, Bob Sternfels, in his recent visit to India said that it is not just India’s decade but India’s century, pointing to India having 20 per cent of the world’s working population by 2047, and becoming a “future talent factory” of the world.
Even the IMF corrected its mistake in May this year when its World Economic Outlook report said that India could achieve the target only by 2029. The year was moved up to 2026-27 after a “data input error” was spotted in the report on India.
The government report further says that if US inflation averages more than 2.3 per cent for the next five years, it would help India manage the rupee better, and India would be able to cross the $5 trillion mark by 2026-27 itself.
The report has pointed out several positive conditions, such as growing exports, strong Goods and Services Tax (GST) collections, expanding digital economy, and a booming startup ecosystem, among other things.
GST collections jumped 15 per cent to cross the mark of ₹1.5 lakh crore this December and are expected to stay above this mark for the coming months.
Notably, India’s economy stood at $1.85 trillion in 2014 and has increased to $3.25 trillion in 2022. Many states such as Uttar Pradesh, Tamil Nadu and Maharashtra have also come up with their own plans to take the State Gross Domestic Product (SGDP) to $1 trillion in the coming five years.
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