Moving towards a 10 trillion dollar economy: India 2030
By Sunil Kumar Gupta
June 12, 2018
The updated figures released by the World Bank for the year 2017 places India as the sixth largest economy of the world, surpassing global giant France which now holds the seventh position. The projections made by a US government agency stated that India is well poised to surpass Japan, Germany, Britain, and France to become the third largest economy by 2030. The annual economic output of India is expected to be almost double than that of Britain ($3.6 trillion) and France ($3.44 trillion) in the next 15 years. Leading Industrialists of the country, as well as other World Leaders, believe that India has the potential to become the world’s third largest economy by 2030 with GDP worth $10 trillion.
The United States Department for Agriculture Economic Research Service has projected that the Indian economy will grow at an average of 7.4% to $6.84 trillion dollars by 2030. The country’s economy grew at a seven quarter high of 7.7% in the three months ended March 2018 owing to higher government spending and investments. The Niti Ayog has projected the Indian economy to grow by an average annual rate of 8% in the next fifteen years. It believes that India can become a $10 trillion dollar economy only when it’s growth rate increases from 7% to 10% annually.
India’s current GDP (2017) is comparable to China’s GDP in 2003, in fact, India may be slightly ahead of China. It took 58 years for India’s GDP to grow to $1 trillion and just 8 years to reach $2 trillion (2016). In the last 26 years, the Compounded Annual Growth Rate (CAGR) was 8.5% in dollar terms; India’s GDP increased significantly from $275 billion in 1991 to $2.25 trillion in 2017. For achieving this 8% annual growth rate, implementation of sensible economic policies are required.With this objective, the present government introduced several initiatives which have had a significant impact on the economy. To elucidate some:
Make in India
The Make in India campaign, launched by the Prime Minister of India Shri Narendra Modi, aims to facilitate investment, foster innovation, enhance skill development, protect intellectual property right, and build best in class manufacturing infrastructure. The initiative focuses on developing a strong base for the budding entrepreneurs of the country. It also aims to de-license and de-regulate the industry during the entire life of the business. Major sectors like Railways, Defence, Insurance and Mobile Devices have opened up to high levels of Foreign Direct Investment; regulatory policies have been relaxed to facilitate ease of doing business and investments. There is strong credibility in India’s economic system today alongside visible momentum, energy, and optimism.
The Digital India initiative was established by the Government of India as a flagship programme to transform India into a digitally empowered society and knowledge economy. It is designed to bridge the digital divide and create digital inclusion. India has the second largest internet subscriber base in the world with approximately 478 million users till March 2018. Aadhar, which is a 12-digit unique identification number based on a person’s biometric and demographic data, has seen a significant growth in the number of registered users from 610 million in 2014 to 1.21 billion in April 2018. This digital identity card was created at a low cost of $2 per head and ensures good governance. United Nations eGovernance index shows India at the 107th position, climbing up 11 positions since 2014. Indian IT exports are growing at a rapid pace, crossing $116 billion dollars for the first time in 2016-17. Revenues generated by the Indian IT sector crossed $140 billion in the same year. ‘Meghraj’ is a ‘GI Cloud’ initiative introduced by the Government of India to harness the benefits of cloud computing. The initiative focuses on accelerating delivery of e-services in the country while optimising ICT spending of the Government. In addition, 120 mobile phone manufacturing units have been set up in the last three years as compared to only 2 units in 2014. This has created 0.45 million direct and 0.3 million indirect jobs in the economy.
The startup India initiative was introduced with the objective of encouraging entrepreneurship in the country at the grassroots level for economic empowerment and job creation. Startup means an entity, incorporated or registered in India upto a period of seven years from the date of its incorporation (or 10 years in case of startups in the Biotechnology sector), as a private limited company or a partnership firm or a limited liability partnership firm; having an annual turnover of not more than ₹25 crore for any of the financial years since incorporation; and working towards innovation, development of product or processes or services. Startup India hub is a platform for all stakeholders in the startup India ecosystem namely, startups, investors, mentors, incubators, accelerators, aspiring entrepreneurs, service providers, and government bodies. More than 5200 startups have come up in the last years with 1000+ startups being added in 2017 alone. Till date, 11,393 startups have been recognised and 129 startups have received funding with an average funding per startup touching $6.2 million.
Invest in India
India is one of the fastest growing economies of the world. Since the launch of the Make in India initiative, FDI inflows have increased by almost 37%. Invest India has played a major role in transforming the country’s investment climate by simplifying the business environment for investors. Potential investors are being provided expertise in the form of market entry strategies, deep dive industry analysis, partner search, location assessment, and policy advocacy with decision makers.
The Standup India scheme was launched by the Government of India to leverage the institutional credit structure to reach out to the underserved section of people like the Scheduled Castes, Scheduled Tribes, and Women Entrepreneurs to enable them to participate in the economic growth of the nation. The objective is to facilitate bank loans between ₹10 lakh to ₹100 lakh to atleas tone scheduled caste or scheduled tribe borrower and at least one woman borrower per bank branch of all scheduled commercial banks for setting up a greenfield enterprise. This initiative has also boosted economic activity in the country.
The basic purpose of Mudra Yojana is to attain development in an inclusive and sustainable manner by supporting and promoting partner institutions and creating an ecosystem of growth for micro-enterprises sector. MUDRA provides re-finance support to Banks / MFIs for lending to micro units having loan requirement upto ₹10 lakh. MUDRA has created three products namely, Shishu, covering loans upto ₹ 50,000; Kishore, covering loans above ₹50,000 and upto ₹ 5 lakh; and Tarun, covering loans above ₹ 5 lakh and upto ₹10 lakh, to signify the stage of growth, development and funding needs of the beneficiary micro unit/entrepreneur and also provide a reference point for the next phase of growth. 10348110 loans, amounting to a total of ₹ 56405.07 crores have already been sanctioned this year. The flagship scheme has been successful in generating 1.68 crore incremental jobs in the country in the first two years of its launch.
Furthermore, the implementation of the Goods and Services Tax(GST) has transformed the traditional base of indirect taxation in India. The objective of introducing GST was to abolish the complex tax structure in India and come up with a more transparent system that could help detect corrupt practices and tax evasions. It has eliminated the cascading effect of tax by introducing a unified taxation system. It has also put India in the line of international tax standards, making it easier for Indian businesses to sell in the global market. GST has also allowed companies to streamline distribution systems—production, supply chain, storage—to make them more efficient. There are about 11.2 million registered taxpayers under GST as compared to only 6.4 million taxpayers under the previous indirect tax regime. Besides, the number of people filing tax returns has also gone up from 5.43 crore in Financial Year 2017 to 6.84 crore in Financial Year 2018. Free flow of tax credits has boosted company financials resulting in a reduced price for consumers. Even though there were some early jitters for the businesses, GST managed itself to bind the country under a system of the unified tax regime.
Even though India has been extremely ambitious in its economic policies and reforms in the past couple of years, achieving the status of becoming the third largest economy will still require significant efforts.
- India can lead the fourth Industrial Revolution by adopting latest technologies with the advent of data, connectivity and artificial intelligence. The initiation of the Digital India scheme has largely transformed the Indian economy thereby, preparing India’s IT workforce for future technologies is very important. Hence, investing in technology is required for sustaining the rapid transformations.
- More than 120 million people are expected to join the existing workforce in the next few years. Adopting conventional methods to enhance the skills and competence of this enormous workforce will not be possible. Hence, we need to come up with alternative methods like learning while doing to educate them and sharpen their technical skills at the sametime. Thus, skilling the burgeoning workforce should be a top priority.
- At present, India has more number of internet users than the US. The e-commerce industry has tremendous potential. Near 100% growth is expected in the e-commerce markets by 2020, valuing at $112.89 billion. Thus, unleashing the potential of this sector can help India significantly in its mission.
- The fast growing young population in the country is perceived to boost economic activity, outpacing the aging developed nations. Tapping the potential minds of this population and nurturing their entrepreneurial spirit is the need of the hour. This will not only lead to capital formation but also generate employment opportunities in the economy.
- Top industrialists of the country believe that to achieve its ambitious goal, India needs to adopt consistent and liberal efforts to ease out the conditions of doing business in the country.
- According to a report published by CRISIL, India needs to spend at least ₹ 50 lakh crore in the next five years to develop infrastructure; implying that the country will see close to ₹ 3000 crore investment per day.
- The domestic energy sector needs to reduce its dependence on imports and for this new approaches and sources of renewable energy production will be needed.
- Addressing gender inequality and increasing the assistance of women in the economy is also required. Without their participation India will continue to fall short of its economic potential.
Each sector of the Indian economy will need to execute efficient solutions if it is to build its GDP to $10 trillion dollars. For this, the sectors need to come up with solutions that are scalable, resource efficient, and environmentally sustainable. The private sector needs to invest more in Research and Development activities, especially for catering to challenges faced by the emerging markets. Government needs to build more Public Private Partnerships for constructing improved roads, ports, healthcare facilities, educational institutions, and to develop low cost and innovative financial models. At present, India ranks 134th in World Bank’s Ease of Doing Business Rankings. This rank can be improved only if the government adopts policies to ease complex regulations related to doing business in India. The increasing MNC culture will further lead to greater flow of Foreign Direct Investment and know-how in the economy. therefore, if India can achieve this growth rate, it will create world class companies that are efficient enough for high growth markets. This would serve India’s already large and virtually growing domestic market to compete on the global stage.
While India moves ahead with hope to achieve its ambitious targets supported by numerous campaigns and reforms, the world has its eyes fixed on her. Much has been said, much has been done, but it's still a long road ahead. Not only is this a big challenge but also an enormous opportunity.