Synopsis:
ICCBizNews presents "Unveiling the Path: Navigating Hurdles on India's Journey towards becoming a $5 Trillion Economy by 2025-26." This report delves into the challenges and opportunities India faces as it strives to achieve its ambitious economic target. Through insightful analysis and expert perspectives, the report explores the strategies and measures required to overcome hurdles and accelerate India's path towards economic growth and prosperity.
With the global economy teetering and tottering at a compounded annual growth rate (CAGR) of 2.9% in 2024 from the level of 3.5% in 2022 to 3% in 2023 according to the International Monetary Fund (IMF), India seems to be growing at a CAGR of 7.3% in 2023-24 up from 7.2% in 2022-23.
Striving for the mission & vision to become a $5 Trillion economy by the end of 2025, India with a nominal GDP of approximately Rs. 296.58 Lakh Crore in the financial year of 2023-24 in comparison to 272.41 Lakh Crore in the previous year of 2022-23, etc, seems to be reporting a healthy growth rate of 6.2% in 2024 with the ministry of finance saying that the Indian economy is going to be more likely touching the 7% mark by 2024-25.
A couple of sectors like Automobile, Healthcare, Education, Finance, IT, etc, are expected to grow by nearly 6% whilst the construction sector is estimated to grow by over 10% and the agriculture and allied sectors to grow by just 1.8% in the present fiscal year of 2023-24.
Now, if this visionary economic goal of becoming a $5 Trillion Economy by 2025 set by the Govt. of India as stated by the Union Home Minister of India, "Mr. Amit Shah", leads to fruition for the nation, then India could stand a fighting chance of witnessing an exponential level of growth in every front of its economy under the hopeful leadership of Prime Minister Narendra Modi.
Furthermore, the significance of achieving the $5 Trillion-goal for the Indian economy is as follows:
Economy: India is currently poised as one of the fastest growing economies in the world with a global rank of being the 6th largest economy in the entire world.
The GDP of India is expected to reach the $5 Trillion mark by 2025, which would most probably make it the third-largest economy on the planet.
Foreign Investment: This status of becoming the third largest economy on the planet could help India in attracting more foreign investment.
New Opportunities: Achieving this goal of becoming a $5 Trillion economy could create a host of new opportunities for the citizens of the nation and investors across the world who would be interested in investing and compounding their wealth in the long run.
Structural Challenges faced by the nation in its quest to reach the $5 Trillion mark:
A. Infrastructural Hurdles: As per the analysis of Drishti IAS, the infrastructure gap in the marketplace of India is around $1.5 Trillion, and it currently lacks adequate infrastructure facilities like roads, railways, ports, power, sanitation, etc, which in the foreseeable future could hinder India's economic development and competitiveness in the Global Marketplace.
Here are a couple of infrastructural challenges that India is currently facing:
Supply chain disruptions: If not addressed adequately with the right type of "Government Policies and Monetary Assistance", etc, this lack of a robust and well-engineered supply chain network that is responsible for the transportation of goods & services from the place of "Production" to the place of "Purchase" could cost the nation a slow down in the speed of "Trade-Related" transactions, increase in expenses related to the transportation of goods & services from one part of the nation to the other and ultimately affect global economic performance.
Crumbling Cities: If India doesn't allocate time, energy, effort & resources, etc, to plan for the production of new emerging & upcoming technologies in the domain of renewable energy it will "Fail" to tackle its problem of crumbling cities like "Rajasthan, Kolkata & some parts of Gujarat " by 2029 leading to a brain drain and talent deficit on the talent pool of the nation due to mass scale immigration to Western and European countries.
B. Regulatory Reforms:
Navigating Complexity: Addressing the complexities and challenges in regulatory frameworks
So, is the Government of India turning a blind eye to the problems of its people??
Um, not really.
Here's a brief overview of the roadmap that the Govt. of India is deploying and utilizing to solve the above-mentioned problems & make India a $5 Trillion economy:
- Macro-level growth to ensure the prosperity of the MSME's of the nation.
- Adoption of the all-inclusive welfare approach at the macro level of development in the nation.
- Promoting the adoption and utilization of digital economy and fintech within the nation to ensure the global competitiveness of our products & services in the global marketplace.
- Striving for Technology-enabled development to tap and penetrate the global business and investment opportunities in the era of the internet.
- Energy transition and climate action to ensure a healthier (in terms of air quality, soil & water quality) and greener environment for future generations.
C. Skill Development Imperatives: The concept of Skill Development in India is vital to the nation to ensure the economic growth and social development of the citizens of the nation.
To foster such a transformation to increase the EQ (Employability Quotient) of the nation, the Govt. of India in 2015 launched the "Skill India" mission to develop a workforce that is both competent and capable of finding and attracting decent job offers in the nation by empowering them with the necessary skills, knowledge, and qualifications.
Global Economic Dynamics:
A. Trade Dynamics and External Dependencies: Analyzing the impact of global trade and dependencies on the economy of India
India's economy is heavily reliant on global trade and external dependencies.
Despite signing several free trade agreement deals with countries such as ASEAN, Japan, and South Korea, India's trade balance has been negative for many years, indicating a significant reliance on imports.
Additionally, India's external dependencies on energy, food, and technology are crucial, and the country must carefully manage them to ensure sustainable economic growth and stability.
The government must prioritize strategies that encourage exports and reduce imports, while also investing in domestic production of essential resources such as energy and technology to reduce external dependencies.
Failure to do so could result in severe economic consequences for the country.
B. Impact of Global Economic Shifts: Addressing how global economic changes can affect India's economic goals
Shifts in the market forces of supply and demand, production and consumption, etc, across the global supply chain could impact India's future economic goals and levels of development in the form of trade-related operations both within and outside the nation, capital investments from foreign countries and companies into the nation which would inadvertently affect the growth of business operations within the nation affecting the GDP & GNP of the nation.
So, when the business operations of the global economy grow, the demand for made-in-india products grows as a consequence leading to a boost in the exports of goods and services of the nation. This increase in export leads to a spike in the FDI's within the nation because everyone if not all wants "Made-in-India" goods & services for XYZ reasons. Due to this the GDP & GNP of the nation (India) grow causing a boom in the economy.
However, the complete opposite happens in case the economic performance of the global economy begins to slump & plummet and vice-versa, the Indian economy faces slow growth in its exports, FDI investments tend to shrink & the growth rate of the economy tends to take a backward slide.
Hence, India needs to be aware of the above-mentioned shifts and take the necessary steps and measures to mitigate the negative impacts of the global economic slump across the planet to be able to safeguard the interests of its people.
Socioeconomic Factors:
The struggle for inclusive growth in India seems to be a significant challenge for both the government and the citizens of the nation.
To begin with, the first challenge seems to be that of backwardness in the agricultural sector in terms of education, infrastructure, and technology.
This sector employs almost 44% of the working population of India but contributes only 16.5% to the country's GDP.
Factors contributing to this backwardness include soil degradation, climate change, and water scarcity.
Second, on the list of challenges for the Indian economy is something known as "Regional Disparities". Over here, the challenge is that some areas are more developed in comparison to others due to the concentration of industries in certain areas like Mumbai, Delhi, Bangalore, Chennai, etc, and lack of infrastructure in other regions of the nation.
Third, we have the challenge of poverty and unemployment, where the poor section of society lacks the necessary educational qualifications & skillset to find good-paying jobs. On the flip side, the demand and supply gap is too big and overwhelming for the Indian job market where even people with decent educational qualifications and skillsets are either unemployed or underemployed.
However, despite all of the above-mentioned challenges, the Indian economy including its citizens & the government itself is striving full speed to achieve its economic goals of inclusivity and a $5 Trillion economy to be able to reduce poverty, create high-paying jobs, and improve the per capita income, standard of living and lifestyle of all of its citizens.
So, all in all, by addressing the problems of infrastructure, education, backwardness, lack of jobs, etc, India could build a more prosperous and equitable society for all its citizens.
Technology and Innovation:
A. Technological Leapfrogging Opportunities: Examining how technology can be a catalyst for economic advancement
To begin with, the concept of "Leapfrogging" in Economics and Business states how small innovations in a micro manner can help a dominant firm stay competitive and ahead in its industry & market sector within its respective country.
In terms of economic development, it refers to a developing country skipping certain stages of industrial development that can help it catch up sooner in the global marketplace.
A couple of ways that technology can help boost the Indian Economic System:
- Digital Transformation: The surge of the digital revolution within the nation could most probably increase its economic value by almost fivefold by 2025. This phenomenon could to an increase in the amount of investments in areas such as AI, blockchain, and/or drones.
- Technology Transfer: This could lead to an incremental increase in the level of productivity in the workforce of the nation, reduce waste of raw materials and other resources in the manufacturing sector, and boost the overall efficiency of the Indian Economy.
- Financial Inclusion: The powerful tools of technology like smartphones, laptops, desktops, AI, ML, Robotics, Blockchain, Cryptocurrency, etc, could assist the nation in achieving financial inclusion that can contribute to its GDP Growth that could if balanced by the right type of monetary & fiscal policies and execution of plans with integrity, responsibility, commitment, etc, by the economic leaders of the nation could lift a big section of people from below the poverty line to a decent standard of living.
- Technology and Production: Progress in the research, analysis, brainstorming, due diligence & development of new and innovative technologies can help the MSMEs of the nation produce more and better goods and services.
B. Addressing the Digital Divide: Discussing challenges related to digital access and inclusion
The digital divide refers to the unequal access to digital technology like smartphones, laptops, internet, etc, due to the lack of infrastructure and industrialization of the region within a nation.
In India, it's a major problem, obstacle, hurdle, challenge, etc, which is affecting the country's aspiration to achieve its big "Economic Goal" of becoming a $5 Trillion Economy.
To bridge this gap of the digital divide, the government of India ought to invest in infrastructure and connectivity, promote digital literacy programs to upskill the citizens of the nation, and more importantly boost the influx of money into the MSMEs of the nation so that the private sector can make more innovative and affordable technology-based solutions like software, laptops, etc, to boost the productivity and efficiency of the workforce to increase the CAGR (Compounded Annual Growth Rate) of the nation on a year-on-year basis.
The role of the civil society-based organizations of the nation then becomes one of raising awareness and advocating for policies that encourage digital inclusion for all of the citizens of the nation.
Creating a digital-friendly economy where everyone has basic if not advanced access to the internet is vital for the nation if it wishes to achieve its dream & goal of becoming a "$5 Trillion Economy" whilst building a more inclusive and prosperous society for one and all.
Environmental Sustainability:
A. Balancing Growth with Environmental Responsibility: Exploring the challenges of achieving economic growth while maintaining environmental sustainability.
The Green Growth Model wherever deployed, has the primary objective of achieving economic growth while also ensuring environmental sustainability and social equity.
The reason for that is, that the planet the future generations get to inherit from the previous generations is much more greener and worthwhile to sustain whilst striving for peak economic prosperity simultaneously.
Here are a couple of benefits of adopting "Green Growth" policies:
Improved levels of productivity, via the formulation of incentives for ensuring greater efficiency & optimum utilization of natural resources within the nation's economy.
Curtailing the levels of waste and energy consumption within the nation's economy.
Unlatching chances & possibilities for innovation and value creation within the nation's economy.
Adopting green technologies, practices, and policies.
Enhancing resource efficiency, conserving natural capital, and improving human well-being.
A bunch of ways India can balance its juggle of economic growth and ecological sustainability in its pursuit of becoming a $5 Trillion Economy:
- Embracing the production and utilization of renewable energy to prevent the unnecessary depletion of natural resources within the nation.
- Cultivating sustainable agriculture practices to prevent the excessive usage and depletion of groundwater in the process of farming.
- Transforming its logistics operations & enforcing regulations that protect the natural resources of the nation.
- Implementing sustainable development practices across its economy & promoting renewable energy programs.
- Establishing Environmental Standards & Benchmarks for ensuring operational efficiency of the operations of its manufacturing sector, & implementing waste management policies.
B. Green Initiatives and Economic Viability: Examining how green initiatives can contribute to economic viability
Green initiatives can assist in lowering energy consumption, slashing your electricity bills sustainably, creating new job opportunities, and most importantly reducing the impact of climate events.
India's Green Growth strategy aims to promote sustainable development and balance growth with environmental conservation through increasing renewable energy production, reducing fossil fuel usage, and moving towards a gas-based economy.
The transition to a green economy improves operational efficiency, reduces waste, and embraces renewable energy, leading to cost savings, enhanced profitability, and increased resilience to fluctuating resource prices. Green initiatives can also attract investments through green bonds & loans.
These efforts as a collective whole can help India achieve its Economic Goal of becoming a $5 Trillion Economy.
Policy Framework and Governance:
A. Policy Consistency and Predictability: Discussing the importance of stable and predictable policies
The government should consult with businesses and stakeholders before developing new policies to ensure that they're well-designed and do not have unintended consequences.
Additionally, the government should be transparent about its policy-making process to build trust with individuals & businesses.
Moreover, policy consistency and predictability are crucial for helping India achieve its economic goals. For eg: Businesses are more likely to invest in India if they are confident that the ruling party's policies won't change suddenly or arbitrarily.
The reason for this is that investment is a long-term game and businesses need to plan for the future before making such a big commitment.
Moreover, investment leads to job creation, and policy consistency and predictability can help create more jobs whilst reducing unemployment in the nation.
Finally, the concept of investment is very closely interlinked with the phenomenon of job creation and economic growth.
Therefore, policy consistency and predictability and predictability can help India achieve its economic goal of becoming a $5 Trillion economy.
B. Administrative Reforms for Efficient Implementation: Addressing challenges related to governance and policy implementation
A good policy framework and government system can help ensure efficient and effective governance. Administrative reforms are essential for India's Goal of becoming a $5 Trillion Economy.
These reforms can address challenges related to corruption, red tape, lack of transparency, coordination, and capacity.
Specific reforms could involve streamlining procedures, improving coordination, investing in human resources and technology, and increasing transparency.
Hence, by implementing these reforms, India can create a better environment and successfully balance its strive of handling economic growth and environmental sustainability to finally achieve the goal of becoming a $5 Trillion Economy.
8. Major sectors contributing to the $5 Trillion mark:
As stated earlier, India has set a target to achieve a $5 Trillion Economy by 2026-27 and several industries and sectors are expected to contribute towards this goal:
- Agriculture: It is one of the largest contributors to the GDP of the nation, where it is the second-largest producer of fruits and the biggest producer and exporter of Lemons, Bananas & Mangoes. However, its contribution to the nation's GDP has fallen to 18% in 2020 from its position as the largest contributor to India's revenue and GDP.
- Automobile Industry: This industry has experienced tremendous growth since the economy liberalized, making it another key industry that could contribute to India's $5 Trillion Economy goal.
- IT Industry: It's one of the newest entrants to the list, with many foreign clients from the US & EU having a strong bond with India for IT software development and outsourcing services.
- Start-ups: These bad boys also play a significant role in the nation's economic growth, particularly in sectors such as EV, Fintech, and job creation.
- Service Sector: Another major contributor with top performers including telecom, computer, information, transport & travel. India aims to achieve US $1 Trillion in service exports by 2030.
Other sectors that stand a fair chance to contribute towards India's $5 Trillion economic goal include aviation, education, oil and gas, and finally roads & highways.
In conclusion, the International Monetary Fund predicts that India will grow at a CAGR of 7.3% in 2023-24, up from 7.2% in 2022-23, while the global economy is expected to slow down.
India aims to become a $5 trillion economy by the end of 2025, with several sectors such as automobile, healthcare, education, and finance IT expected to grow by nearly 6%.
However, there are challenges in achieving this goal, such as infrastructural hurdles, regulatory reforms, and skill development imperatives.
India's government is deploying strategies such as macro-level growth, adoption of a welfare approach, digital economy promotion, technology-enabled development, and energy transition and climate action to overcome these obstacles.
Additionally, the government must address the challenges of trade dynamics, regional disparities, poverty and unemployment, the digital divide, and environmental sustainability to achieve inclusive growth.
Finally, India's major sectors that could contribute to the $5 trillion goal include agriculture, automobile, IT, start-ups, service, aviation, education, oil and gas, and roads & highways.
Moreover, if we as a nation can accomplish this goal of becoming a "$5 Trillion Economy" then this could help lift millions of people above the poverty line and liberate them from the vicious economic cycle of unemployment & lack of growth in the financial aspect of their life and position as a powerhouse of economic & spiritual well-being that we once were.
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