Finding Investments For A $5 Trillion Economy
Inclusion|April - September 2019
As India sets the target of $5 trillion economy, GDP indicators show a downward trend. Quarterly GDP growth falls to 5 per cent—seven year low, casting a shadow on Modi’s plans. While it may be true that $1 trillion was added between 2014 and 2019, making it a $3 trillion economy; adding another $2 trillion will be a difficult task.
Finding Investments For A $5 Trillion Economy

Investment has become a buzzword. Right from Finance Minister’s Nirmala Sitharaman’s budget speech on 5 July 2019 through Prime Minister Narendra Modi’s Independence Day speech setting the government’s goal of $5 trillion for Indian economy or `343 lakh crore in five years, i.e., 2024. Clearly so, investments have become an urgent priority.

The rising trajectory of growth is certain to take the economy to $5 trillion. The recent track record experience of the economy has been a positive one as far as accelerating growth goes. The economy grew 3.5 per cent from 1950-1980 and 5.5 per cent from 1980-2000 and 7.5 per cent from 2000-2012. It’s only in the last five years that the growth rate has slowed down.

The primary policy challenge that needs to be overcome for reaching the goal of growing the size of the economy to $5 trillion, he highlighted, is to figure out why the economy slowed down and how it can return to the long-term trajectory of 7.5-plus per cent growth. In other words, the nature of the economic challenge will have to be understood for the right policies to follow.

For the last 20-30 years, the expectations were that India is a rising-curve economy and currently expectations are bearish because of the deceleration in the rate of investments seen year-after-year over the last five-six years, which then resulted in a deceleration in the rate of savings.

Reviving the expectations, according to Sanjaya Baru, is the key to reversing the slowdown in private investments. “We need a 1991-type approach where everyone in government is involved in reviving optimism in the economy but policymakers in this government have not understood the importance of sentiment”.

He called the 5 July Budget “a wasted opportunity’’ that could have been the occasion to alter the sentiment exactly the same way, the July 1991 budget had done it overnight.

This story is from the April - September 2019 edition of Inclusion.

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This story is from the April - September 2019 edition of Inclusion.

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