Monday, 2 April 2018

India to be a $5 tn Economy by 2025

After a year of disruptions in the Indian economy following the cash purge and the Goods and Services Tax, Asia’s third-largest economy is now well poised to achieve new heights of growth, despite the obstacles like rising debt and the trade protectionism. According to Finance Ministry, Indian economy is on track of doubling its size to $5 trillion by 2025, with greater focus on start-ups, MSMEs and infrastructure investment.

Finance Ministry, at the CII Global Industry Associations Summit, exuded confidence that India is on course to recording a growth rate of 7-8 per cent and it can achieve even higher rates of expansion by focussing on producing goods and services and generating demands for next 7-8 years. India’s GDP in value terms currently stands at $2.5 trillion—making it the sixth largest economy in the world.

India is now home to one of the fastest growing start-ups ecosystem in the world, thanks in large part to government efforts to remove barriers to entrepreneurship and extend support for tech start-ups. As the government’s economic reforms continue to materialize, we can expect many more companies to make commitment in India’s business community, supporting its growth story.

To ensure these start-ups continue to scale up, the country need to continue promoting a favorable business environment where start-ups can afford to innovate and access capital.

As far as MSMEs are concerned, India has seen a strengthening MSME segment in the past few years. Significant progress has been made on few challenges that had been the major obstacle to the growth of MSMEs. One can draw an inference that concerns such as government regulations, bureaucracy, availability and cost of land, and certain labour-related challenges have reduced to some extent. Though, the key challenges such as access to finance; availability of infrastructure; availability of skilled labour; power supply and technology-related issues continue to plague the sector. While demonetisation and GST have had an impact, they have also created a framework for majority of MSMEs to join the organised segment.

Further, the rising income levels and economic prosperity is likely to drive demand for infrastructure investment in India. According to Economic Survey issued earlier, around USD 4.5 trillion worth of investments are required by India till 2040 to develop infrastructure to improve economic growth and community well being.

With regard to inflation, the ministry said that its trajectory is well within the RBI’s target of 4 per cent, plus/minus 2 per cent.  The wholesale price index based inflation fell to a 7 month low of 2.48 per cent. The consumer price based retail inflation was also at 4 month low of 4.44 per cent in February. The RBI takes into account retail inflation while formulating its monetary policy.

Undoubtedly, the Indian economy is on higher growth trajectory. While there are some sectors which are growing at a higher rate, there are others which are struggling with various policy measures and challenges. Even so, the strong spirit and commitment to develop is noticeable. 

Latin Manharlal Group

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