I am reasonably certain that in the next decade, sometime in the middle or later part, we should target reaching the $5-trillion economy mark, Arun Jaitley, Finance Minister, said at the India Economic Conclave in Mumbai on Thursday via satelite link.
How should India reach its target of achieving a $5-trillion economy?
Arun Jaitley: In simple language, we have to almost double the size of our economy in the next few years. We must keep some bare realities in mind and those realities include the fact that we are globally no longer in a high-growth economic era. A high-growth economic era was a period between 2003 and 2008 when global economy grew much faster and therefore during that boom period a lot of economies which conventionally grew at a moderate level also grew faster.
If we have the experience of the Chinese economy, over the previous 30 years, they grew at an approximate rate of 9%. But today, there is a 9% growth rate for our country which is a reasonable base and not really so easy to achieve. To achieve that you will have to have extraordinary domestic story coupled with some tailwinds coming from the global growth itself.
Those tailwinds do not seem to be so visible. Additionally, if we look at the situation of challenges, we live in a world with uncertainties. Trade war creates an uncertainty. Unforeseen events like the Brexit create an uncertainty. The hardening of the dollar for many economies creates an uncertainty. The fluctuating oil prices particularly for net buyers like India if they move up create an uncertainty.
Now it is in the midst of these global challenges that we have to really steer our economy on a high growth path. When we have to steer it on a high growth path, the fundamentals that have to be kept in mind are that we have to concentrate on sound policy or we would to momentarily get swayed by mere populism.
Mere populism on a solitary occasion may earn you some advantages but then it is not going to lead to a sound direction as far as the economy is concerned.
In the last few years, the India growth story has been quite good. We would have hoped for something much better if the global environment was also favourable. We have the satisfaction of having an economy which is faster than any other economy in terms of growth amongst the major economies in the world.
I do not think compared to the last four to five years, we have ever had macros of this kind where we have inflation under control in 3-3.5% range. We have a fiscal deficit which is on a glide path gradually coming down. We have large foreign exchange reserves. We have. by and large. kept our current account deficit under control except for the brief six-seven month period when the oil prices again started skyrocketing.
Now fortunately, since there seems to be a trend downwards, I do hope we will be able to improve upon that figure as far as CAD is concerned. In the midst of all this, what we really need to concentrate on is when I say policy, it means we should continue with the reforms agenda that we have had.
At times you tend to slow down on the reform agenda because of the political situations which exists in the country but never should we fall to the temptation of ever reversing that agenda.
Secondly, when you move on that reform agenda, it is ultimately in the long run going to show good results. For instance, all that we have done over the last few years has certainly resulted in a situation that we are somewhere around 7.4% growing economy over the last several years.
If we can improve upon that trait and move towards 8% economy over the next few years and maybe try to exceed that figure, our target of reaching a $5 trillion economy over the next few years will become a realisable dream.
What do we do in order to carry on this agenda? I think there are several unreformed sectors in the economy and we must keep those basic parameters in mind and look at those unreformed sectors where we need to move forward. We must never fall to the temptation of sheer populism because that will be short lived and that is not going to bring results in the long term.
It is also important that we have seen the benefit over the last four to five years of additional revenues coming in into the pockets of the exchequer because of the high growth rates and that money is really to be spent one on infrastructure, obviously governments have service themselves, they have to spend a lot on their own salaries, pensions, repayment of loans, servicing of the debt, on defence expenditure, etc, and a large part of it really has to be spent on the social sectors and on rural India which are the areas where growth really has to still pick up.
For the next two decades, that is 20 years, our agenda should be clearly laid out. We continue to improve upon our infrastructure. We continue to improve upon the quality of life in urban areas. We need to have more cities and townships because they really become the engines of growth and we need to spend a lot on these areas.
At the same time, our spending on healthcare and education both at the central and state government levels will really have to be increased.
Even a programme of some expenditure like Ayushman Bharat in the first three months we have just had 5 lakh people who got their hospital treatment free from amongst the 40% poorest section of Indian population and rest of it we really have to invest in the urban poor and into the rural India.
We have seen that experiment over the last few years building roads, building houses, educational institutions, electrifications, irrigation, the sanitation facilities, amenities of modern urban like livelihood to them, cooking gas was one symbolic improvement in their quality of life itself and if we can keep investing year after year in these areas, I think you still have at least four areas that I can see where a lot of investment is required where growth will naturally occur.
The first of course is infrastructure, coupled with it you will need more townships. The second is rural India, future growth has to really come in from there. The third area is going to be gender as far as the participation of women in the economic life of the country is concerned. We are seeing increases in womens education in health and in their reach to more regular forms of employment. The fourth area is geography, the eastern parts of India which are agriculturally and mineral rich but where the growth rates are never so high that it needs to be exploited to the fullest and we can look at these areas as future engines of growth.
If we can retain these agenda for the next 20 odd years, Indias ability to get rid of poverty, to elevate itself to a developed economy and in the meanwhile, over the course of the next few years, I am reasonably certain that in the next decades sometime in the middle or later part, we should target reaching the $5-trillion economy mark which you set as an agenda.