Never miss a story

Get subscribed to our newsletter


×
he growth from $2.7 trillion to $5 trillion amounts to an output expansion of 85 per cent, or at about 13 per cent compounded annually. Pixabay

Since the time Prime Minister Narendra Modi has set a bold target of making India a $5 trillion economy by 2024 at a NITI Aayog meeting early last month, the conversations in the mass media have disproportionately centred on the idea.

The Economic Survey – released a day before the Budget was presented in accordance with tradition – elaborated upon the idea and suggested that India needs to grow at least at 8 per cent per annum to achieve the target.


As per our estimates, however, this figure seems conservative. The growth from $2.7 trillion to $5 trillion amounts to an output expansion of 85 per cent, or at about 13 per cent compounded annually.

Assuming inflation of 4 per cent, which is the mandated target for the Reserve Bank of India (RBI), the required real growth of the Indian economy is estimated at 9 per cent per annum. Nevertheless, in either case it can be argued that the $5 trillion target will be challenging for the Indian economy.

The few economies that have achieved such high growth rates on a sustained basis are Asian economies like China and South Korea. The survey rightly identified investment, and more specifically private investment, as the key driver of such sustained economic growth, which has been the case for these high-growth economies.


Minister of Finance Smt. Nirmala Sitharaman.

It recommended that on these lines, the private sector needs to be re-vitalised and an aggressive exports strategy should be followed. Such a suggestion raised hopes of a fiscal stimulus from the budget of the newly elected government. This would have complemented the monetary stimulus being provided by the RBI through three successive rate cuts.

The budget did chalk out a blueprint for undertaking large-scale infrastructure activities, which are usually the means adopted to provide a fiscal stimulus. The plan includes improving the country’s transport infrastructure through the construction of water grids, I-ways and regional airports along with a massive boost to develop the rail infrastructure over the next decade.

But instead of infusing taxpayer money, the budget proposed the Public Private Partnership (PPP) model to meet its financial needs. While such a model might be fiscally prudent, the PPP model might face challenges to take off as the investment activity in the economy is already subdued and a more direct fiscal push would be required to kickstart growth.

For now, the government has prioritised fiscal prudence by lowering the fiscal deficit target to 3.3 per cent of the GDP for FY20, which had been pegged at 3.4 per cent for the current fiscal in the interim budget.

While the intent to stay on the path of fiscal consolidation is commendable, it would not have been as problematic to ease on the tightening considering the urgent need to improve economic growth currently.

But a deeper look into the budget figures shows that the lower fiscal target might be missed next year. The fiscal deficit target of 3.3 per cent is based on the estimate that the net tax revenue for the current fiscal would see an increase of over 25 per cent over the previous fiscal.


How will 2019 budget look like? Pixabay

This seems optimistic when considered against the fact that the tax revenues had merely risen by 6 per cent in the last fiscal cycle. A fiscal stimulus was probably avoided in the current budget keeping the uncertainty of the tax revenues in mind.

Another case of where the budget financial estimate can prove optimistic is in the disinvestment target of over Rs 1 lakh crore, which includes the sale of Air India. Considering the current state of the airline sector, an imputation of the sale of the debt-ridden government airline should be included with caution. Thus, steering clear of fiscal exuberance was probably the appropriate approach.

While the path to a $5 trillion economy is a medium-term goal, the budget also carried promising elements that point to the right directional approach that the economy should adopt over the long run. It has long been argued that the obsession with GDP figures fails to take into account the real issues that matter to the citizens of a country. The idea that higher output leads to higher incomes, which would enable well-being of citizens can be simplified by directly ensuring improvement in the well-being of the populace.

ALSO READ: Health Advocates, Doctors Welcome Levy of Excise Duty on all Tobacco Products

Hence, the stress on enhancing the ease of living in the budget is a commendable idea to pursue. Surely, the provision of efficient services in a society – be it health or education – supersede the specifics of growth levels at 8 or 9 per cent for the average Indian citizen.

The government has a rare opportunity to introduce such impactful change in the Indian economy owing to its strong electoral mandate and it is promising to witness its effective utilisation on this front. (IANS)


Popular

IANS

Beauty icons Kriti Sanon and Shanaya Kapoor believe in natural and clean beauty products.

Clean beauty products are making inroads and have gained a significant share of the beauty market, with more more people becoming aware of the their benefits. With each passing year thanks to technology, research and development natural ingredients have finally regained their place in the spotlight. Don't take our word for it, beauty icons Kriti Sanon and Shanaya Kapoor also believe in natural and clean beauty products, and associate with the 'Naturali' range launched by RP-Sanjiv Goenka Group. The new age nature-inspired personal care brand aims to provide a one-of-a kind experience to their customer infused with trendy natural ingredients delivering quick visible results.

Hair care ambassador Kriti Sanon said, 'I am extremely thrilled to be associating with Naturali haircare range that is infused with modern, trendy natural ingredients which are free from harmful chemicals. I have always been an ardent supporter of the 'no nasties' proposition when it comes to my hair care needs, hence this association came very naturally to me. Everyone knows that natural products are supposed to be good for you, but they are often believed to be slow in giving results. Naturali changes this, as the range has a unique SuperBlend of complementary natural ingredients, that are optimized to give you quick visible results. As a woman myself, I strongly believe that no woman should ever have to compromise especially with respect to her beauty choices. So, it is extremely fulfilling to see a brand that is not only good for you being free from harmful chemicals but also makes you look good.'

sliced fruit on white surface Clean beauty products are making inroads and have gained a significant share of the beauty market, with more more people becoming aware of the their benefits. | Photo by Brooke Lark on Unsplash

Keep Reading Show less
wikimedia commons

London Bridge as it stands today

Children are often seen running around singing "London Bridge is Falling", and making a face of sadness when they reach the last line. Most people assume that the Fair Lady referred to in the rhyme is the Queen of England, and the current queen at that. But the history behind this rhyme goes farther back in time than we realize.

Speculation associated with this rhyme has to do with a process call immurement. Immurement was when a person was enclosed in a room with no exit points. This was more an act of superstition than punishment. It was believed to bring sturdiness to the structure if people were imprisoned behind the walls. London Bridge falling down was something that people at the time associated with weakness. But there is no evidence to substantiate the idea of immurement.

Keep Reading Show less
wikimedia commons

A Jain monk offering ablution to Bahubali in Shravanabelagola

Atop the Vindhyagiri hills in Karnataka, a 57-foot-tall statue stands. This is the statue of Lord Gomateshwara, or Bahubali, as he is known to the local patrons. The surrounding area is filled with temples where each of the many Jain Tirthankaras sits.

Sharavanabelagola is named after a pond that is located at the foothills. 'Bel' in Kannada means white, and 'kola' means pond. This is a sacred water body to the activities of the temples. It is a tourist attraction and a pilgrim destination located 85 kilometres from Mysore, and 145 kilometres from the capital, Bangalore.

Keep reading... Show less