Central government think tank NITI Aayog is preparing a 25-year roadmap for the Indian economy.
According to the news published in media its aim is to make India a 30 trillion dollar economy.
Its vision paper estimates that India can become an economy worth $6.69 trillion by 2030, $16.13 trillion by 2040 and $29.02 trillion by 2047. This figure is according to current dollar references.
According to International Monetary Fund (IMF) data, the size of the Indian economy this year will be around 3.73 trillion dollars. In such a situation, to achieve the mentioned target, 9 percent growth will have to be achieved annually in dollar terms till 2047.
Although the details of this plan will be revealed only when this document is made public, this target is certainly ambitious.
There’s certainly nothing wrong with setting a slightly ambitious goal. The reality is that their help can help move policy changes in the right direction.
It will also be interesting to see the policy path that NITI Aayog is pursuing and for which it is working with other government departments and perhaps also consulting independent and private sector economics experts.
Since India’s economic growth in the last decade in current dollar terms has been a little more than 7 percent, it will not be easy to increase the growth rate by two percent or more in the next 25 years.
India will face many challenges and it would be better to highlight them in the vision document.
If this is done then it will help the government to take its policies in the right direction.
For example, global growth may remain lower than expected in the near future. Some economists also believe that global interest rates, especially in the US, will remain high for a long time due to structural factors.
In such circumstances, it will be difficult to maintain the growth rate at a high level for a long time.
The government has significantly increased capital expenditure after the pandemic. This has also helped in improving the condition of infrastructure. However, this has led to delays in fiscal consolidation.
Sustained high budget deficits and increased public debt may constrain the government’s capacity and may leave it in no position to intervene when needed.
This may increase the risk to financial stability. Moreover, to achieve high long-term growth, India will have to increase manufacturing output.
Despite many efforts in the past, India has not been able to raise the level of manufacturing to the desired level.
This is the biggest obstacle in the way of creating quality employment on a large scale. If this can be done, it will help in increasing consumption demand and achieving sustainable growth in the long run.
The decline in manufacturing has also affected India’s exports, which could be a major driver of growth.
It would be appropriate to see what the vision paper says in the context of business.
India has adopted a strategy of high tariffs coupled with fiscal incentives for large producers, which may not work in the long run.
It is noteworthy that according to the statistics, there could be a trade deficit of more than three trillion dollars in 2047.
It may be difficult to compensate for that. To achieve higher growth, India will have to increase spending on education and health. Only a skilled labor force can be a driver of growth in the long run.
Along with this, there will be a need for significant investment in renewable energy. By doing this, dependence on imports will be reduced and economic growth will become more sustainable.
Since many challenges will come in the way of growth of the Indian economy, it would be better for policy makers to review the performance from time to time and make necessary adjustments.