Prime Minister Narendra Modi, on Independence Day last year, laid down a visionary target of transforming India into a $5 trillion economy by 2024-25. The announcement of a Rs 102 lakh crore infrastructure pipeline, under the National Infrastructure Pipeline, by the Finance Minister Nirmala Sitharaman last year was seen as a step in that direction. But things did’t fall into place thereafter.
India witnessed an 11-year low GDP growth of 4.2 per cent in FY19 on account of deceleration of mining, manufacturing and farming sectors. And this year, the Covid-19 pandemic reared its head as the biggest impediment to India’s ambition.
The Indian growth story down the ages has been largely consumption-led and spurred by the services sector. Services have contributed over 50 per cent to the country’s GDP, with agriculture and manufacturing doing their bit.
The Covid19 pandemic threw India’s economy into a tailspin. The gross domestic product (GDP) contracted by a record 23.9 per cent in the first quarter and 7.5 per cent in the second quarter of 2020-21. India has, in fact, entered a technical recession – two consecutive quarters of contraction – for the first time in many decades.
Every problem is an opportunity in disguise, John Adams, the second president of the United States, said long while ago. The Prime Minister Narendra Modi-led government has used the Covid19 calamity to unveil the Rs 29.88 lakh-crore stimulus package viz. Atmanirbhar Bharat Abhiyaan to revive the coronavirus-battered economy and push it back into a growth trajectory.
It has overhauled labour and farm laws, fine-tuned foreign direct investment norms to attract foreign investment and rolled out a production-linked incentive (PLI) scheme to push domestic manufacturing. An emphasis on manufacturing and other sectors can reduce the over-dependence on services as a propellent to growth, as services, agriculture and industry sectors work in tandem to drive the growth engine.
India is already on the path to becoming the hub for hi-tech manufacturing as global giants such as Apple, Siemens, Toshiba and Boeing are either setting or expanding their manufacturing facilities in the country.
The government also increased FDI in defence manufacturing under the automatic route from 49 per cent to 74 per cent to promote indigenisation of defence production under its Make-in-India initiative. It also amended existing consolidated FDI policy to restrict opportunistic acquisition of domestic companies.
The start of vaccination campaign in the United States and the ongoing development of vaccines elsewhere provide a glimmer of hope that the human race may finally conquer the dreaded covid19 virus. The Indian economy may not only revive, but also emerge stronger in the post-covid world, at least going by optimistic projections.
The new geo-political realities, with the emergence of an increasingly ambitious and aggressive China also present India with an opportunity to be an alternative to China and become an integral part of the global supply chain as multi-national corporates seek to de-couple from China.
Moreover, India has a strong demographic dividend and will continue to do so, in the coming decades. The country is also a democracy, with political stability and relatively low exposure to external vulnerabilities.
All these factors should propel India into a $5-trillion economy. The moot question is, When.