Recently, at the Governing Council meeting of the NITI Ayog, the prime minister announced the target of a $5 trillion economy for India by 2024, which seems quite promising for the Indian economy.
Keeping in mind the aspirations of New India, let us see what it will take for India to become a $5 trillion dollar economy.
The present exchange rate of the Indian rupee is ₹70 per US dollar, which converts the $5 trillion economy in Indian rupee as ₹3,50,00,000 crore of GDP at current prices which is the nominal GDP (excluding inflation).
The Indian economy at present is a $2.7 trillion economy which is equivalent to ₹1,90,10,164 crore of GDP at current prices.
Thus, the economy should be increased by $2.3 trillion to reach the desired target.
To reach the desired target, India must increase the total production i.e the output expansion by 84% in the next 5 years. In other words, the annual growth rate must be increased to 13% at nominal GDP. If 4% of inflation is taken into consideration, the required growth rate in real terms comes down to 9% per year.
Things required to achieve the required growth rate:
In order to achieve the required growth rate, the domestic savings must be mobilised, and investment rates must be raised. In the last 5 years, on an average, the domestic saving rate was 30.8% which must be increased to 41.2% and the investment rate was 32.5%, which must be increased to 32.5%.
Further to boost the investment foreign capital inflow must be increased.
The digital consumer base of India is the second-largest in the world and is growing at the second-fastest rate amongst the major economies. Our inclusive digital model is narrowing the digital divide within the country and bringing benefits of technology to all segments of the people. Half the potential economic value of $1 trillion in 2025 could come alone from the new digital ecosystem in diverse sectors, including financial services, agriculture, healthcare, skills, e-governance and other sectors.
Thus, it all depends on how the policymakers can provide a policy push to achieve our goal of a $5 trillion economy by 2024.