Context

• According to the IMF’s World Economic Outlook, the size of the Indian economy will increase from $3.2 trillion in 2021-22 to $3.5 trillion in 2022-23 and cross $5 trillion in 2026-27. In this backdrop, this article tries to analyze the challenges and issues in achieving the 5$ trillion economy.

Government’s roadmap and measures

• The government’s roadmap to making India a $5 trillion economy comprises measures like 
  • Focussing on inclusive growth
  • Promoting digital economy,fintec
  • Technology-enabled development
  • Energy transition and climate action, and 
  • Relying on a virtuous cycle of investment and growth
• Major reforms like Goods and Services Tax (GST), Insolvency and Bankruptcy Code (IBC), a significant reduction in the corporate tax rate, the Make in India and Start-up India strategies, and Production Linked Incentive Schemes (PLIs), among others, will initiate growth of the Indian economy.

Challenges in achieving the 5$ trillion target

• India’s economic growth pivots on capital, productivity and labor, and data show that for over four-fifth of Indians, the $5 trillion economy is a bridge too far.
  • Capital challenge:  According to Oxfam, in 2021, 1% of the population owned about 41% of the nation’s wealth, while 50% owned 3% of its wealth. However, investment is funded by the low resource citizens. 
    • Approximately 64% of the total Goods and Services Tax (GST) came from the bottom 50% of the population, and the top 10% contributed 3% of GST.
  • Labour challenge: The contribution of labor, the other driver of growth, is limited due to dubious educational and skill attainments and halting digital literacy. 
  • Productivity is just beginning to get a boost through the creation of digital and physical infrastructure.
• Low Per Capita income: With a per capita income of $2,400, India ranks 149 among 194 countries in 2022. There are no official estimates of India’s per capita income projected to be at $5 trillion. (Japan’s Per Capita Income- $34,000, China’s-$13,000.
• Inequality challenge: India has a value of 21.9 in the inequality index of World Economics which has a scale of 0-100, where a high value indicates a more egalitarian society. (Japan and China have a value of more than 50).

Conclusion

• India should strive to become 5$ trillion economy without deepening the existing divides.

https://www.thehindu.com/opinion/op-ed/a-5-trillion-economy-but-for-whom/article67565388.ece#:~:text=Consider%20capital%3A%20in%202021%2C%201,who%20will%20seize%20the%20initiative.