$5 TRILLION INDIAN ECONOMY

India has strengthened its macro fundamentals and has improved dramatically in recent years. Approx $550 billion of forex reserves gives policy-makers the confidence that the country can easily cope with any external headwind. 

Hello readers!! I am here with part 2 of the economy article designed to serve you with an idea of what is the position of India in achieving the target of a $5 trillion dollar economy amid the crisis.

For those who haven't read part 1 in which; the background of the environment in which the Indian economy is trying to achieve its target of a $5 trillion economy, for them the link to the Indian economy overlook is shared here.

Part 1: INDIAN ECONOMY OVERLOOK

Approx $550 billion of forex reserves gives policy-makers the confidence that the country can easily cope with any external headwind. Withstanding the challenges of covid and inflation worldwide, India continues to be one of the fastest-growing economies in the world. 

India has strengthened its macro fundamentals and has improved dramatically in recent years. With a focus on the Aatmanirbhar Bharat initiative and the creation of an investor-friendly eco-system. So, even if the goal post has to be shifted, India is going to be a $5-trillion economy during the 2020s only.

Henley Global Citizen Report

The migration of high net-worth individuals (HNIs) to advanced economies has been a hurdle. Henley Global Citizen Report, which follows private wealth and investment migration trends globally, reports as many as 8,000 HNIs have been predicted to leave India in 2022.  

• Primary factors driving the migration
• The charm of a higher standard of living
• Better education and health facilities for the family
• Strict tax rules 
• Need for stronger passports 
• Entrepreneurs exploring global business and investment prospects 

Measures to achieve a $5 trillion Indian Economy

Public-Private Partnership: Apart from the limited success in the road sector, the PPP model hasn’t quite worked in India. Hence, an important requirement will be to firm up a viable policy to promote public-private partnership (PPP) in the country.

Long-term capital for infrastructure: Drawing long-term capital, such as pension funds, to the infrastructure sector, will be crucial to the successful implementation of projects like the National Infrastructure pipeline. 

Aim for greater, faster divestitures: India’s resolve to sell stakes in Public Sector Enterprises (PSEs) could be a game-changer for the economy and help fund capital expenditures, which can be used to stimulate the economy.

Boost the middle class by abolishing personal tax: Abolishing personal taxes in India could be the biggest stimulus to the economy, making the country an attractive hub for global talent and foreign investment. The revenue shortfall is possible to be recovered from higher indirect taxes.

 

Accelerate the infrastructure pipeline: India needs to focus on outcome-driven infrastructure building new cities, ports, bridges, high-speed rail and highways will have a multiplier effect on jobs and help reduce unemployment, like spending by charting a 10-year fiscal path for rating agencies.

Build on manufacturing momentum: During the Covid-19 crisis, India became the largest producer of personal protective equipment (PPE), which gives hope for sectors like medical textiles, smartphones and semiconductors this will support the “Make in India” initiative.

 

Outcome-oriented investments in health care: India’s drastically low healthcare spending must be increased through targeted, outcome-based stimulus. To improve the medical facilities, India could provide incentives for doctors and entrepreneurs to set up hospitals in rural areas.

Way forward

In between all the challenges, we need massive investments of around $300 billion per year in key infrastructure sectors, such as roads, railways, airports, waterways, ports, gas and transport. 

The investment will not just spur economic growth but create enormous scope for employment, thus providing income to people and bolstering consumption on a sustained basis. The government have to take the lead to create durable infrastructure assets, as capital expenditure has a much higher multiplier effect than revenue spending.

-BHAVNA GEED.

Link to other articles:-

PART 1: INDIAN ECONOMY OVERLOOK

INDIA AND SOUTH EAST ASIA

FOREIGN POLICY

LEFT-WING EXTREMISM