Making India a Ten Trillion dollars economy is one of the most ambitious announcements made by the Modi Govt recently, which seems to have stirred the hornet’s nest. Is it really possible for India to reach the milestone in the coming decade, considering the fact that we are witnessing a slowdown at present? A situation which rattled the economic planners in New Delhi so much that they had to come out of the slumber and announce series of emergency measures to break the fall.
But before we reach a conclusion lets revisit some history. India breached the One Trillion dollars GDP mark in 2007. That’s 60 years after independence. But the next 01 Trillion worth was added to GDP in next 07 years, and we reached Two trillion $ mark in 2014. Presently we are hovering around 2.8 Tr mark, and it’s expected that our GDP figure would reach 3 Trillion by next year, which is a period of just five years. So it’s safe to assume that the pace of economic wealth creation is fastening with each passing year, and the target is indeed achievable if the Modi Govt plays its cards right.
There are three factors which the Government of the day needs to manage to accelerate the growth trajectory. These are the real GDP growth rate, Rupee valuation and Inflation. Let us visit each one of them one by one. Strong GDP growth is going to be the bedrock of the Ten trillion USD economy. So from what all sectors can India fuel its growth to achieve this ambitious target in a squeezed timeline? Considering the fact that the share of services in the size of the economy is well over 50 percent, the additional growth has to come from manufacturing and from the weakest link in the chain i.e Agriculture.
We need to grow beyond being a big market for foreign companies. A lot of progress has been made in auto, pharma, textiles manufacturing industries in our country. Similar success has to be replicated in Electronics manufacturing industry, in which India currently lags behind. It can be a huge source of employment. Govt needs to invest big time in semiconductor and nano tech research, which will be the technology driver in future. It’s the right time to also mould our education system to gear up for the future by offering courses that will cater to the industry.
Recently Defense Minister Rajnath Singh spoke about the importance of Defense industry as a major contributor to the GDP. India has consistently been the World’s largest arms importer. A larger economy will stimulate the Govt to spend more on defence, opening up investment avenues for private industry. We have a long way to go in aerospace, jet engine technology, land warfare systems etc. The current model of Strategic Partnership in joint production of defense products is much like a beginner’s guide. It can give a start but won’t help propel Indian companies like L&T, Tata, Godrej, Reliance etc to reach the size and level of Lockheed Martin, Raytheon, or Boeing. To do so Govt must break monopolies like OFB, HAL and bring in more competition in the field. More funds have to be pumped in IIT, IISCs to stimulate research on defense technologies. The added advantage of progress in this sector is that builds a skilled workforce, can generate a lot of employment and is less affected by downturns.
The second most important sector which needs massive overhaul is agriculture. In spite of being the largest source of employment, the share of agriculture is the lowest. Thanks to the Green Revolution we have become self reliant in staple food grains. But it isn’t so in case of pulses and oilseeds crops. Govt needs to invest in providing better seeds to farmers, and ensure better soil & water management. We also need to move up the value chain in agri businesses. Crops or varieties having export opportunities, better market potential should be promoted among farmers. Today Olives are grown in Rajasthan while White onions, potatoes exported from Gujarat. So there have been some success stories. But there is lot of scope for more.
A rising currency impacts the GDP growth in a positive manner. The more we trade in Rupee the stronger the currency becomes. India s major import bill comes from oil. It’s one of the factors that pull the currency down. By gradually switching oil payments in Rupees we can prevent depreciation of the currency. Another benefit of trading in Rupees is that the exporter country is forced to channelize the money back into our country so as to prevent over accumulation. Which it would try to do by reinvesting the money in our country. But to make it happen requires political will and diplomatic heft, a thing luckily is not in short supply these days.
In order to achieve these goals it is imperative that proper credit supply is maintained by the central bank and inflation kept under control. The role of the Govt has to be of a facilitator. It can perform its role better by initiating land & labor reforms in the next budget. Also, the massive 1.76 Lakh Crore money transferred by RBI should be used to fund stalled infrastructure projects and infuse fresh capital in banks.
India is on the cusp of a transformational change. With the kind of electoral backing the present Government has, it should not shy away from taking bold decisions that will make the 10 trillion dollar economy dream come true.