Prime Minister Narendra Modi after beginning his second term as the prime minister of India gave a clarion call for India to achieve the target of a 5 trillion-dollar economy by 2024. He called the target as challenging but achievable.
This target given by PM Modi has already seen the foundations for it being put in place in his first term as prime minister. India is already climbing the ladder in World Bank’s Ease of Doing Business rankings. As a big boost to Indian business climate, the Modi government announced corporate tax cut to 22% from 30%, making it one of the competitive economies in the globe. For new manufacturing units, the tax cut goes further down to 15%.
Foundation for a 5 trillion-dollar economy
A nation’s full potential is realised when its citizens have their most basic amenities taken care of. PM Modi’s government in its first tenure made every possible effort to make sure that people of India have access to fundamental necessities so that they can realise their full potential.
For example, worries of the poor over housing are being taken care of Pradhan Mantri Awas Yojana which is being implemented in full force so that every Indian has a house over his head by 2022. Over 1.86 crore affordable houses were built since the scheme’s launch in 2015.
A house also needs a running electricity connection. Under Saubhagya Yojana 99.9 percent households have been electrified. The work of electrifying every village had already been completed in 2018. With more than 8 crore women beneficiaries, Ujjwala Yojana has made the lives of rural women better and smoke free.
Financial inclusion with Jan Dhan Yojana made banking accessible to a large Indian populace. A bank account is an empowering instrument in this digital era for an individual to start a business or any kind of financial activity or to ensure government benefits reach people directly.
Talking about health, Ayushman Bharat is going to benefit 10 crore poor families giving them the insurance cover of Rs. 5 lakh per family per year.
Crores of people who were earlier being pushed deeper and deeper into poverty due to lack of basic necessities and lack of access to healthcare are now able to assert their presence on the economic landscape of India due to the Modi government’s empowerment measures.
How India will achieve the 5 trillion-dollar economy target in 5 years?
Indian economy was about $1.85 trillion when Modi government was elected at the centre. In 2019, it has reached around 2.7 trillion dollars. It took over 55 years for the Indian economy to reach 1 trillion dollars. But the Modi government added about 1 trillion dollars in just 5 years.
Economic growth is boosted by a virtuous cycle of savings, investment and exports supported by a favourable demographic phase which India is already in. Job creation is driven by this virtuous cycle.
When there is investment, there is more focus on building companies that leads to capacity creation, increase in supply of goods and services, more demand and jobs. This cycle further brings in massive employment opportunities for youth and ensures growth of savings, consumption and thus, economic growth.
Hence, encouraging investment is the key driver in boosting growth. In the first term of the Modi government many structural reforms such as bank mergers and recapitalisation, Insolvency Bankruptcy Code, FDI reforms in various sectors and real estate reform (RERA) were implemented.
With the landmark legislation of GST, which completely overhauled the indirect tax structure in the country, traders are benefiting due to increased transparency and simplification of tax filing, while consumers are benefiting from reduced taxes.
In a major boost to Ease of Doing Business, FDI has been allowed in contract manufacturing through automatic route and in coal sector. Additionally, FDI norms for single brand retail have also been eased. Modi Government’s continuous efforts to improve ease of doing business have clearly reflected in the World bank rankings with India improving to rank of 63 in 2019 from 142 in 2014.
The industry and analysts have hailed a huge cut in corporate tax as a historic move that gives India one of the most competitive tax rates in the region. It further impacts the job market as companies now have more money to invest back in their businesses.
The move to abolish Angel Tax was also widely hailed as it will not only unshackle angel investing for start-ups but also bring in domestic monies for them and help them to achieve global scale.
Creation of next-generation stronger global sized Indian public sector banks will be imperative for formation of 5 trillion-dollar economy. In this regard, the government has been taking several measures to strengthen the banking sector as well as reduce its NPA. The decision of the Modi Government to consolidate 10 public sector banks into 4 entities will not only improve the efficiency of the bank and ensure economies of scale but also improves risk management and help banks to wider their coverage. Government also front loaded 70,000 crores for recapitalisation of public sector banks.
The move to set up an Alternative Investment Fund with initial corpus of 25,000 crores to revive 4.6 lakh housing units will further boost the real estate sector and bring relief to a large number of middle-class and lower middle-class homebuyers who are under financial stress.
With a promise to invest Rs 100 lakh crore in infrastructure in the future, the Modi government realises the importance of infrastructure for driving India to a 5 trillion-dollar economy. Also, building infrastructure leads to massive job creation.
For the first time ever, the Modi government ensured a paradigm shift in policymaking in agriculture. Earlier, agricultural policies were about productivity. But the Modi government shifted it to profitability by setting a target of doubling farmers’ income and working towards it.
Also, Modi government is looking at the farmers as exporters and not just as mere producers.
PM Modi had said in a speech –
"Now, we are looking at the farmers as exporters and beyond just being producers of food. We have the potential to export food, milk, vegetables, honey or organic products.”
Farmers form the core part of the Modi government’s strategy to reach the 5 trillion-dollar target as a huge chunk of our workforce is employed in agriculture.
The government’s focused push on value addition and food processing is benefiting farmers by increasing the value of their produce.
Sanitation and Water Conservation
A clean, healthy and a beautiful India will make the 5 trillion-dollar journey easier. Saving lakhs of lives due to better sanitation and reducing healthcare expenditure on diseases, leaves people better placed to aspire for a greater economic future. The massive strides taken in sanitation are impacting health outcomes of people positively, reducing their expenditure on health-related exigencies.
Similarly, conservation of water will further expedite the process since with depleting ground water resources and climate change, water might become a scarce resource.
With such a strong foundation and a clear roadmap, it is clear that India is well within its capacity to become a 5 trillion-dollar economy by 2024.