INDIA: Road to $5-trillion economy; When and How?

INDIA the 5th largest Economy in the World and it is expected to be the 3rd largest Economy in next few years according to IMF just after USA and China. India being World’s largest democracy looks promising in its Growth. India is one of the fastest growing economies of the World. Currently India’s GDP is $3.53-trillion and now it is targeting to reach at $5-trillion in near future. This ambitious target became a hot topic when Prime Minister Narendra Modi set the target of turning India into a $5-trillion economy by FY25 while addressing the nation from the ramparts of Red Fort on August 15, 2019. At that time, India and the whole World for that matter were unaware with the fact that it will see a biggest pandemic of the century in year 2020 and 2021. After facing the worst, in 2022 the economic activities took its pace and economy came under recovery mode. In late 2021 PM Narendra Modi again emphasis on his Government aim to make India $5-trillion economy by FY 2025. So the Question arise Will India can ever achieve its target of being $5-trilion economy? The answer is absolutely YES! Hence no discussion needed. Now the Question of importance is WHEN? And most important is HOW? So let’s try to figure out these questions of utmost importance, its roadmap and its real benefit to common people.

What does it mean to be $5-trillion economy.

GDP is a measure of what a country as a whole produces; it is measured in Nominal and Real terms. Nominal GDP growth includes the inflation and Real GDP growth is inflation adjusted. So formulae is Real GDP growth rate = Nominal growth rate – Inflation. Let’s suppose a country produces only one good of worth Rs. 100 and next year its price becomes Rs. 110 due to inflation, it makes Nominal growth 10% but in real terms it is 0% . So the Real terms GDP growth is more important as far as ground reality concerned.

Currently only USA and China have achieved the mark of $5-trillion, Japan and Germany are soon going to touch it. If India enters in $5-trillion club, it will send a strong message to World that now India is on path of growth and it is investment friendly. It is a benchmark how rest of the World perceive India. It becomes more important if India achieve it in Real terms, not only in nominal terms by keeping inflation tight in the range of 3-4%. Right now the inflation figures are worrisome not only in India but for the whole World. It is due to post Covid impact and recovering from its loss. It will get better with time when recovery progresses.

When will India be $5-trillion economy.

The past figures for India’s GDP:

Year GDP
2002 $500-billion
2007 $1-trillion
2015 $2-trillion
2019 $3-trillion


India was at $3.17-trillion by FY 21; in order to archive $5-trillion in FY 25 India needs a grow at CAGR of 12-13%. It seems less realistic considering the current GDP growth rate i.e. 8-9%. Considering current growth rate and projected figures, India will become $5-trillion economy by FY27 and that is not less than an achievement for Indian Economy.

Current Ground reality:

Inflation even in countries like UK and USA is hitting double digit, India is also facing high inflation issues. It has reached to more that 7% in previous year and 6-7% in current year. The India’s growth will reach to common people only when inflation will be in control, else whole lot of energy of common people go into surviving in this high inflation, forget about their own growth. The situation is not good; currently the gap between Nominal GDP growth rate and Real GDP growth rate GAP is increasing.

But positive coming from this is that this Gap will reduce in future. Recently RBI had written in its bulletin that worst Inflation is behind us and from now good figures will start coming in picture.

Nominal and Real GDP of India
Gap betweenNominal and Real GDP of India

How India achieve its ambitious Goal.

So the gist coming out is increasing the Real GDP growth rate is the real key to wear the crown of $5-trillion economy. India’s primary focus should be on Infrastructure sector because this is the sector which directly and indirectly carries more than 200 sectors. Infrastructure sector has highest potential of job generation and it will also reduce the logistic cost. Indian economy is consumption based it should now aim to be exports driven economy. Then making digital penetration to every corner of the country and making digitally inclusive society. India also needs to make priority to boost manufacturing sector and it should create such environment that foreign companies can easily set up its plants and operations in India. Increasing investment in Research and development, innovation and emerging technologies like Artificial Intelligence, Electric cars, cloud computing etc to go hand-in-hand with developed countries. All these measures not only bring the growth but it will sustain for long term.

Major challenges to address

The Goal is ambitious and naturally there will be challenges in its path. The major challenges India is facing are:

  1. The first and foremost challenge to take economy on track again after the hard hitting of COVID-19 and to get out of its impact, there is a need of policies of Designing,Funding and Governance.
  2. India needs to improve its infrastructure which primarily needs power supply. Power supply needs fuel and for fuel India is mostly dependent in other countries. 95% of fuel is imported and the Global tensions like Russia-Ukraine war, Iran sanctions, trade wars etc. increase the price of fuel and hence its import becomes slow. Domestically also Power sector needs restructuring in which government has still not taken any strong steps.
  3. India’s primary sector is Agriculture and it is less productive due to land fragmentation, low at technology and over dependence on monsoon. It is facing long pending reforms; it should be taken swiftly in best interest of farmers.
  4. The over dependence on service sector for jobs creation, this problem is pertaining from very long time. Focus on sectors like Infrastructure and manufacturing can resolve this issue.
  5. Creating an investment friendly environment by easing the process for businesses and stratups. Companies like TESLA are still struggling to set up their operations in India.

Optimism and positivity

India is country of 1.35 billion, in which majority population is young that is called demographic dividend. India’s demographic dividend is expected to reach at 1.1 billion by 2050. Every year a large no. of youngsters are joining the workforce.  These new era Indians are bringing Optimism and Positivity to the country. The New India foundation is already brought and this young population is bringing new Ideas, new mindset, new energy and new dreams. India will achieve $5-trillion economy goal or any other such achievement because new age Indians has the Optimism and Positivity to achieve anything and everything.

Finance Tapasvi

Kapil Khatri

I write about Finance, Economic and Social issues. I also write on topics which have public importance.

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