PROJECT REPORT

ON

INDIA’S JOURNEY TOWARDS $5 TRILLION DOLLAR ECONOMY

MASTER OF COMMERCE

BUSINESS MANAGEMENT

PART- 1 (SEMESTER-1)

(2021-2022)

INTERNAL ASSESSMENT

SUBJECT: COST AND MANAGEMENT ACCOUNTING

SUBMITTED BY: MIHIR MAHENDRA KOTHARI

ROLL NO: 33

K. J. SOMAIYA COLLEGE OF ARTS & COMMERCE

VIDYAVIHAR (EAST)

AFFILIATED TO UNIVERSITY OF MUMBAI

 K. J. SOMAIYA COLLEGE OF ARTS & COMMERCE

VIDYAVIHAR EAST

CERTIFICATE

(2021-2022)

This is to certify that the project titled INDIA’S JOURNEY TOWARDS $5 TRILLION DOLLAR
ECONOMY is a project work done by MIHIR MAHENDRA KOTHARI ROLL NO: 33 in
fulfillment of the requirements for the MCOM in ACOUNTANCY (PART-1) (SEMESTER-1)
during the academic year 2021-2022 is the original work done by the candidate and completed
under guidance of PROF. GIRISH KARNAD.

DATE:- DECEMBER 2021

PLACE:- MUMBAI

…………………..... …………………….
Internal Examiner External Examiner

...................................
……………………
(Dr. SONALI DEOGIRIKAR) (Dr. VEENA
SANEKAR)
M. Com Coordinator Principal
 DECLARATION BY STUDENT

I, MIHIR MAHENDRA KOTHARI ROLL NO: 33 student of MCOM in ACCOUNTANCY

(PART-1) (SEMESTER-1) (2021-2022) hereby declare that I have completed the project on
INDIA’S JOURNEY TOWARDS $5 TRILLION DOLLAR ECONOMY under the supervision
and internal guidance of PROF. GIRISH KARNAD and that the contents of the project are not
copied from any other source such as internet, earlier projects, textbooks etc.

The information submitted is true and original to best of my knowledge.

Thank you,

Yours faithfully,

MIHIR
MAHENDRA KOTHARI
ROLL NO: 33
 ACKNOWLEDGEMENT

I would like to thank all the people who helped me in undertaking the study and completing the
project by imparting me with their valuable information and guidance that was required at every
stage of my project work.

I would like to Thank our Principal, DR. VEENA SANEKAR and MCOM Co-ordinator Dr.
SONALI DEOGIRIKAR, for giving me an opportunity and encouraging me to prepare the
project.

Last but not the least, I would like to thank my project guide PROF. GIRISH KARNAD for
guiding and helping me throughout the preparation of my project, right from selection of the
topic till its completion.

NAME: MIHIR MAHENDRA KOTHARI

ROLL NO:33
INTRODUCTION
The Trillion dollar club is an unofficial classification of the world's major economies with a
gross domestic product (nominal GDP) of more than US$1 trillion per year.[1][2] As of 2017, it
included 16 countries. This does not include purchasing power parity, which increases the GDP
of many poorer countries.
Due to the world financial crisis, South Korea and Australia exited the trillion dollar club as their
nominal GDPs shrank below $1 trillion in 2008 and 2009 respectively. Australia rejoined the list
in 2010 while South Korea did so in 2011 as these countries' nominal GDPs once again were
above $1 trillion. Accordingly, with the IMF, Mexico's estimated nominal GDP in 2009 also
diminished below the trillion dollar mark, although other sources such as the CIA reported it
above the mark.
Prime Minister Narendra Modi has set a massive target to make India a $5 trillion economy by
2024. While our economy is currently $2.92 trillion, holding sixth place in the world, India needs
to produce 9% of GDP growth every year to realise the goal. The precise goals of the
Government are to raise the service sector's contribution to $3 trillion, the manufacturing unit’s
to $1 trillion, and the agriculture unit’s to $1 trillion as well. The focus is on uplifting the
financial condition of the population under the poverty line and as the third-largest economy in
the world.
Although the COVID-19 pandemic has resulted in a massive crisis and caused a huge economic
crisis, there were a few significant measures and projects announced to shape and execute the
Government’s vision.
An economic survey was undertaken and a 'Team India' formed to make India a $5 trillion
economy. The Government has also taken steps to help NBFCs and HFCs with credit guarantee
systems by sanctioning support of ₹5 lakh crore to these firms. It has also approved various
proposals worth ₹7,000 crores and more.
On the real estate side, the system has taken steps to support real estate firms, corporate tax, and
capitalisation of banks. It has cleared dues worth lakhs of crores to enhance market liquidity. The
RBI has sanctioned more than ₹70,000 crore worth of loans under the new regime. The
Government is encouraging schemes to boost private investments in the country. The MSMEs
marked ₹80,000 crores worth of investments. FDI is missioned to improve exports and boost
exchange return
On 15th August 2019, delivering his 6th Independence Day Speech, Prime Minister Narender
Modi expressed confidence that India would be a $5-trillion economy in 2024. More recently,
speaking at a function to mark 100 years of ASSOCHAM in New Delhi on 20.12.2019.

What is a $5-Trillion economy?

 
Before we move forward, lets understand the term clearly.
Simply put, the $5-trillion economy is the size of a national economy as measured by the annual
Gross Domestic Product (GDP).
What is GDP? The GDP of an economy is the total monetary (rupee) value of all goods and
services produced in an economy within a year. GDP is a way among countries (economies) to
decide who is the largest and so on.
In 2014, India’s GDP was $1.85 trillion. In 2018, it is $2.7 Trillion, and India is the sixth-
largest economy in the world.
How to achieve $5 Trillion Economy Target
Going forward what steps can Government take to get closer to its target. Niti Ayog CEO
Amitabh Kant recently outlined these steps. 
 
1. Increase Ease of Business and Ease of Living to promote private investments Over the last
four years, the government has scrapped over 1,300 antiquated law! It has done away with a lot
of archaic procedures, rules and regulations.
Through a series of reforms, India has jumped up 65 positions in The World Bank Ease of Doing
Business. No other large country has been able to do this. India has jumped up 65 positions, but
our challenge is that in the next two years India must reach the top 50 and in the next five years
reach the top 25.
 
2. Urbanization – a big driver of growth
Cities account for less than 5% of the earth land mass, but they account for over 75 % of the
global GDP! So, Urbanization in cities is important as they are centers of economic growth.
 
While the process of urbanization has ended across America and Europe, and matured in China,
it has just begun in India. In the next 5 decades, India should see more Urbanization than what
we've done in the last 500 years. While there will be many challenges, India needs more
Urbanization to grow rapidly. 
3. Globalization for growth
India exists in a globalized and interdependent world. Like in Japan, Korea and China,
Globalization has helped large sections of population to be lifted above the poverty line. India's
share in global export is less than 2%. So, India must learn the art of size and scale, of
manufacturing to size of scale and to penetrating.
 
4. Women Participation is key
India cannot grow at high rates over a 3-decade period without gender parity. In India, only 26%
of the women work; the worldwide average is 48%. If such a major chunk of the population is
not working and we consciously don't put women into positions of power, it will be very difficult
for India to grow.
  
5. Agriculture Reforms in vital
It's not possible to grow over long periods of time without some very major structural reforms in
the agriculture sector because that's where close to 60% of India lives. You can't keep growing
on subsidies, you can't keep going on just giving assistance to farmers without ensuring better
markets, without putting technology, without contract farming and so on. Agriculture sector
reforms are critical.

Objectives
To analyse the growth patterns of productive sectors and economy at large and, thereby,
postulate the sectoral growth rates to attain the US$ 5 trillion objective, we have made the
following attempts for our empirical analyses:
1. Growth trajectory for US$ 5 trillion: estimation of overall growth rates and timeline.
2. Analyses of sectoral and GDP growth patterns.
3. Sectoral growth trajectory for US$ 5 trillion GDP.
At the onset, we analysed the overall GDP growth rate required to attain US$ 5 trillion along
with impact of COVID-19 pandemic. In the second objective, the historical growth patterns and
contributions of three productive sectors—agriculture, industry and services—are ascertained.
This has helped us explore the growth trajectory of each productive sector in third objective. The
following section elaborates the analyses and results for each of the above objectives.

Focus on MSME Sector

The significance of 65 million MSMEs who create about 120 million jobs and 30 per cent of the
country’s economic output and around 30 per cent of total employment generation cannot be
underestimated. Keeping this in mind, the Government has undertaken several transformational
reforms in MSME sector recently.
New manufacturing operations will allow India to become part of few global value chains and
help in raising exports to a trillion dollar mark. India has to focus on setting manufacturing
ecosystem for product groups and take steps like setting-up machinery that manufacture the
products, speciality materials, biologics, nanotechnology, integrated circuits, embedded systems,
medical imaging devices etc. Not to forget computers, TVs, mobile phones, and telecom
equipment, auto components, toys, furniture, footwear and apparels. These skill and labour-
intensive products can absorb part of surplus people from the agriculture or informal sector.
There is a need to emphasize on flexible labour laws as these are an essential precondition for
large-scale manufacturing.
Focus on Agriculture Sector
Agricultural sector, which contributes around 14 to 15 percent to GDP, has remained largely
unaffected by the disruption caused by the pandemic. Rather, it has shown dynamism not only in
cultivation but also in allied sectors such as plantation and horticulture, fisheries, animal
husbandry and dairy farming. As already noted, agriculture recorded a growth rate of 3.4 percent
in the first quarter (April-June) of 2020 despite all odds.
India’s foodgrains production was 285 million tonnes (MT) in 2018-19 which rose to a record
level of 295 MT in 2019-20. The target for 2020-21 has been set at 299 MT. A vibrant
agricultural sector is a guarantee for meeting primary needs of the people.
In the wake of the pandemic, the Government of India promulgated three Ordinances on June 5,
2020 relating to agriculture, which have now been replaced by Acts of Parliament. The Farmers
(Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020, is
a dedicated legislation to enable contract farming based on written agreements.
The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, liberates
farmers by giving them the freedom to sell anywhere. It is expected to facilitate lucrative prices
for farmers through competitive alternative trading channels to promote barrier-free intra-state
and inter-state trade of agricultural goods. The Act also permits electronic trading of farmers’
produce in the specified trade areas. The Essential Commodities (Amendment) Act, 2020 has the
objective of restricting the conditions on which the government can impose stock limit on
agricultural produce.
The above three legislations have unshackled the agricultural sector in the same way as the
Industrial Policy Statement, presented to Parliament on July 24, 1991 by the then Prime Minister
Narsimha Rao, which freed the industrial economy from the cobwebs of unnecessary
bureaucratic controls. That policy statement reduced the list of industries reserved for public
sector from 17 (included in the Industrial Policy Resolution of 1956) to only 8. Subsequently, 6
more items were de-reserved. Thus, at present there are only 2 industries reserved for the public
sector, viz. atomic energy and railway transport. Similarly, it abolished industrial licenses for all
projects, except for a short list of specified industries related to security and strategic areas,
hazardous chemicals, and environmental concerns.
The reforms in the agricultural sector, through the above three legislations, have already started
showing results. According to data made available by the Ministry of Agriculture and Farmers
Welfare on October 10, 2020, India’s exports of agricultural commodities surged by 43.4 percent
in the first half (April to September) of 2020-21. While in 2019-20, the total farm exports in
April-September period stood at Rs 37,397 crore, the figure increased to Rs 53,626 crore in the
same period of 2020-21.Focus on Services Sector
Services contribute to 56.5 per cent of GDP but create only 30 per cent of jobs. So far, IT sector
has been the mainstay, exporting over 80 per cent of its $150 billion turnover. But it is also to be
seen that more than 50 per cent of IT revenues come from the US, therefore the future looks
challenging at the backdrop of current US policies.
Now the sector needs to develop expertise in IOT, AI, VR and their applications. Travel and
tourism, health and professional services can be the other key service sectors. Better delivery of
infrastructure, education and essential services would also create a large number of jobs and
growth.
The travel and tourism sector created 40 million jobs and contributed a significant 10 per cent to
the GDP. Considering the variety of experiences India offers, the sector can grow manifold with
project-driven investments in budget hotels, medical tourism, tourist safety and creating new
tourist attractions.
Another big opportunity comes in global healthcare and wellness which is a $8 trillion industry
and would require over 100 million health workers in the next 15 years. There is an opportunity
in converting India’s 600 district hospitals as medical nursing and paramedical schools to train 5
million doctors, nurses and paramedics to meet the global requirement, who in turn can remit
billions of dollars foreign currency every year. There is a huge potential in construction sector
which contributes 10 per cent to India’s GDP and it is the largest job-generating sector after
Agriculture.
A Trillion Dollar Opportunity in Digital India
Digital India Initiative was launched by the Prime Minister on 1St July, 2015. With a strong
foundation of digital infrastructure and expanded digital access through Digital India Initiative,
India is now poised for the next phase of growth-creation of tremendous economic value and
empowerment of citizens as new digital applications permeate sector after sector. India can
create up to $1 trillion of economic value from the digital economy in 2025, up from around
$200 billion currently generated.
India’s digital consumer base is the second largest in the world and growing at the second-fastest
rate amongst major economics. Our inclusive digital model is narrowing the digital divide within
the country and bringing benefits of technology to all segments of people. Half the potential
economic value of $1 trillion in 2025 could come from new digital ecosystems in diverse sectors,
including financial services, agriculture, healthcare, logistics and transportation, jobs and skills
market, e-governance and other areas.
Finally, there is no doubt that how quickly policymakers are able to provide the policy push will
decide how fast we can achieve our goal of $5 trillion economy by 2024.
The Prime Minister has seen a dream of a ‘New India’ which will be a $5 trillion economy and a
model of Good Governance for the world. PM has set the following Vision for New India:
To be free from poverty, full of prosperity;
To be free from discrimination, filled with equality;
To be free from injustices, ensconced in justice;
To be free squalor, covered with cleanliness;
To be free from corruption complete with transparency;
To be free from unemployment, enriched with employment;
To be free from atrocities against women, full with respect for women; and
To be free from despondency, full of hope
Analyses and results

The latest GDP estimate for the current 2019-20 year and exchange rate of Rs 70.39 per dollar

(average exchange rate of 2019-20) yield a $2.9 trillion GDP. This has to touch the $5 trillion

level by 2024-25 (within five years).This implies exchange rate-adjusted compound annual

growth rate (CAGR) of about 13.5 per cent — close to NITI Aayog’s projection of 11.5 per cent.

It must be heeded, however, that this estimation of desired growth rate (CAGR) to attain the

GDP objective is devoid of the COVID-19 impact.In fact, the ambitious target of $5 trillion GDP

was set prior to the COVID-19 pandemic. The onslaught of COVID-19, followed by the

nationwide lockdown in the first quarter of 2020, has made India’s $5 trillion GDP target

surreal.Global uncertainty, disrupted trade and spiking the exchange rate to Rs 77 from Rs 70.39

per dollar swell the impossibility of achieving this target.Amid macroeconomic shocks and

uncertainties, many national and international institutions and rating agencies have released

revised GDP growth forecasts for 2020-21.Standard and Poor’s Global Inc, Fitch Solutions Inc,

the World Bank and the Reserve Bank of India (RBI) released negative growth projections

between -1.5 and -5 per cent.Moody’s Investors Service Inc and the International Monetary Fund

posited non-negative growth numbers of 0 per cent and 1.9 per cent.Most projections from

institutions and agencies, however, have a consensus on a growth outlook above seven per cent

for 2021-22. This is because of fiscal and monetary stimulus and reforms announced by the

Centre accompanied by the unravelling of pent-up aggregate demand in the

economy.Incorporating the adversity in GDP growth due to the pandemic, we considered a

conservative GDP growth rate of -3.2 per cent for 2020-21 relying on the World Bank’s estimate

and RBI’s negative territory forecast.It is inevitable that subdued growth of $5 trillion target

trajectory in 2020-21 will either devolve the growth pressure to subsequent years or push the

target year to a later period.Our estimation for the post-COVID-19 period from 2021-22 to 2024-

25 yields a CAGR of 18.1 per cent. This estimate indicates the Indian economy needs to grow at

an annual rate of 18.1 per cent to attain a GDP target of $5 trillion by 2024-25 which looks more
surreal than real.The unrealistic-looking projected growth rate of 18.1 per cent prompted us to

investigate the alternative to attain the $5 trillion target which is, naturally, a postponement of

the target year.In the post-COVID-19 period, the economy is expected to recover and revive as

argued by multilateral institutions, rating agencies and economists, including the Centre’s chief

economic advisor.Economists went ahead and said the Indian market will emerge stronger than

ever post-COVID-19, given liquidity support and future demand.This revival is attributable to

stimulus and reforms announced by the Centre for all productive sectors. These stimuli and

reforms may attract investment and growth in productive sectors and primarily include:

 Labour and Insolvency and Bankruptcy Code reforms

 A change in the Micro, Small and Medium Enterprises definition
 Credit guarantees
 Privatisation of public sectors
 Additional budget allocation to the National Rural Employment Guarantee Scheme
 Agricultural produce market committee reform
 Contract farming
 Many state-level packages announcements

The effectiveness of these stimuli and reforms, however, depend on their implementation and

thus remain debatable.Given this, from 2021-22, we postulated the economy’s productive sectors

to follow their respective historical growth trajectories of the previous five years.Therefore,

agriculture, industry and services are expected to grow annually at their historical average of
about 7.5 per cent, 9.0 per cent and 11.4 per cent respectively.This looks more realistic and

acceptable than the 18.1 per cent annual growth rate derived and discussed earlier.These

considerations and analyses revealed the Indian economy can attain only $3.8 trillion by 2024-25

and reach the $5 trillion mark by 2027-28 with a CAGR of 9.97 per cent.This implies COVID-19

pushed India’s $5 trillion dream by three years.Further, our analyses with different GDP

forecasts for the COVID-19 impacted year reveal any projected GDP growth rate between -5 per

cent and four per cent during 2020-21 pushes the $5 trillion objective by three years further.The

discussion on GDP growth trajectory, with COVID-19 impact and without it, is visualised

below.GDP growth trajectory for $5 trillion objective

CONTRIBUTION OF DIFFERENT SECTORS IN ACHIEVING THE GOAL OF $5
TRILLION ECONOMY
Service Sector is the largest sector of India. Gross Value Added (GVA) at current prices for
Service sector is estimated at 92.26 lakh crore INR in 2018-19.  Service sector accounts for
54.40%, Secondary sector (comprising manufacturing, electricity, gas, water supply & other
utility services and construction) account for 27.03 % while the Primary Sector (comprising
agriculture, forestry, fishing and mining and quarrying account for 18.57 % of total India’s GVA
Primary Sector
 Investment is the key for the flourishment of areas like agro-processing, and exports,
Agri-startups and Agri-tourism, where the potential for job creation and capacity
utilisation is far less.
 Investment needs to be driven to strengthen both public and private extension advisory
systems (educating farmers about technology and management practices).
 It would also serve as a stage to demonstrate resource conservation and sustainable use
through organic, natural and green methods, and also zero budget natural farming.
 India has the highest livestock population in the world, investment should be made to
utilise this surplus by employing next-generation livestock technology. This would lead
to a sustained increase in farm income and savings with an export-oriented growth model.
 Investment in renewable energy generation (using small wind mill and solar pumps) on
fallow farmland and in hilly terrain would help reduce the burden of debt-ridden
electricity distribution companies and State governments, besides enabling energy
security in rural areas.
 A farm business organisation is another source of routing private investment to
agriculture. Linking these organisations with commodity exchanges would provide
agriculture commodities more space on international trading platforms and reduce the
burden of markets in a glut season, with certain policy/procedural modifications.
Manufacturing Sector
 A three-pillar strategy has been suggested to achieve required expansion of output —
focus on existing high impact and emerging sectors as well as MSMEs.
 To boost electronics manufacturing, it said the government should consider offering
additional fiscal incentives such as a limited-period tax holiday to players investing more
than an identified threshold of investment.
 Similarly, for the auto and auto–components sector, it recommended encouragement of
global leaders for the identified components to set up manufacturing bases, and
incentivising players willing to invest more than a threshold in identified areas.
 The report suggested measures to boost manufacturing in other areas
including aeronautical, space, garments, organic/ayurvedic products besides emerging
areas such as biotechnology, electric mobility, unmanned aerial vehicles, medical
devices, robotics and chemicals.
 For micro, small and medium enterprises, the working group said there is a need to
improve access to funding by way of development of SME credit risk databases, SME
credit rating, and creation of community-based funds.
Service Sector
 Services sector include improving rail connectivity and seamless connectivity to major
attractions; facilitating visa regime for medical travel; allowing expatriate professional to
perform surgeries in identified hospitals; and e-commerce policy and regulatory
framework for logistics segment.
 This sector contributes significantly to India’s GDP, a goal of around 60 % contribution
of services sector has been envisaged for 2024. Exports and job creation, increased
productivity and competitiveness of the Champion Services Sectors like IT, tourism,
medical value travel and legal will further boost exports of various services from India.
 The Commerce Minister has identified 15 strategic overseas locations where the Trade
Promotion Organisations (TPOs) are proposed to be created.
 Multi-Modal Logistics Parks Policy (MMLPs) aims to improve the country’s logistics
sector by lowering over freight costs, reducing vehicular pollution and congestion and
cutting warehouse costs with a view to promoting moments of goods for domestic and
global trade.
 In the defence sector, there is a need to identify key components and systems and
encourage global leaders to set up manufacturing base in India by offering limited period
incentives; and ensure incentives result in technology/process transfer.
 To promote growth of accounting and financial services, there is a need to FDI in
domestic accounting and auditing sector, transparent regulatory framework, and easing
restriction on client base in the accounting and auditing sector.
 Measures like exploring introduction of insurance in the film industry, promoting private
investments in film schools, exploring franchise business models to exploit film
franchise, and promoting gaming industry value chains aims to push audio visual
services.
 Foreign universities are allowed to set up campuses in India, easy visa regime for
students and education service providers, removing regulatory bottlenecks, providing
recognition of online degrees and setting up appropriate evaluation techniques for online
courses for the education sector.
INITIATIVES UNDERTAKEN FOR ACHIEVING $5 TRILLION ECONOMY TARGET
The Government is working hard to realise Prime Minister Narendra Modi’s dream of making
the country a five trillion-dollar economy by 2024 and has taken steps to overcome the phase of
economic slowdown. The nation is witnessing a new sense of dynamism and a number of
initiatives are being taken in line with Modi’s vision of ‘New India’. Principal Secretary to the
Prime Minister Pramod Kumar Misra recently said that while several fundamental and path
breaking reforms have been undertaken in the form of Insolvency and Bankruptcy Code and
GST, continuous opening up and liberalisation of FDI have resulted in unprecedented inflows of
FDI into the country. On December 13, Finance Ministry unveiled a detailed presentation on
steps taken to boost economy. Chief Economic Advisor Krishnamurthy Subramanian said the
government is focusing on increasing consumption to boost economic growth. Presenting steps
taken by the government in the past few months to pull the economy out from a six-year low
growth, he said the measures include corporate tax cuts to improve risk-return of companies

Raise divestiture target: $200 billion over 4 years

India’s resolve to sell stakes in Public Sector Enterprises (PSEs) could be a game-changer for the

economy and help fund capital expenditures. In fiscal 2022, the government has budgeted $25

billion from stake sales in PSEs and financial institutions. It looks ambitious, yet we reckon the

total value of the government stake in the BSE PSU Index (BSETPSU) is $170 billion, almost 7x

the 2022 divestiture target. Including stake-sale proceeds from unlisted firms, the government

could pull in $200 billion in revenue over the next four years, which can be used to stimulate the

economy.

To add accountability, private-sector experts should be appointed as joint secretaries to the

privatization department, while approval steps should be limited to expedite decisions.
Boost the middle class: Eliminate income tax

Abolishing personal taxes in India could be the biggest stimulus to the economy, making the

country an attractive hub for global talent and foreign investment. The contribution of income

taxes in India is 2.5% of the GDP, quite low compared with most other countries. Only a quarter

of the overall tax revenue is collected via the income levy, with corporate accounting for 25%,

and indirect — primarily the Goods and Services Tax (GST) — 50%. About 2-3% of Indians pay

income taxes and mostly comprise the salaried class. Slashing or reducing personal tax rates will

likely incur a fiscal burden of 2-3% of GDP.

A part of the revenue shortfall can be recovered from higher indirect taxes demand gets a boost

from increased disposable income.

Speed up $1.4 trillion infrastructure plan

India needs to focus on outcome-driven infrastructure spending by charting a 10-year fiscal path

for rating agencies. Dedicated focus on building new cities, ports, bridges, high-speed rail and

highways will have a multiplier effect on jobs and help reduce unemployment. Projects as part of

National Infrastructure Pipeline (NIP), with capital spending of $1.4 trillion, should be expedited

and monitored against timelines. For funding, private financiers, off-balance sheet funding,

overseas pensions and insurance capital should be sought, with a quasi-sovereign guarantee.

Any wastefulness because of higher infrastructure spending won’t be a concern in the long run,

as the economic stimulation will likely outweigh short-term funding pressure.

Covid-19 brought manufacturing skill to the fore

Amid the Covid-19 crisis, India became the largest producer of personal protective equipment

(PPE), which is a testimony to the country’s manufacturing prowess. Before the pandemic, India

was a net importer of PPE kits. However, amid import bans and within a span of two months, the
country became self-reliant for PPE and started exporting the kits. The government should

capitalize on this momentum and aggressively set out to become self-reliant. As companies adapt

the “China + One” strategy, India’s government must show its intent with faster land clearances,

reduced bureaucracy and greater incentives to attract investments in sectors like medical textiles,

smartphones and semiconductors.

Improvement in land and capital productivity, along with attracting longer-term capital, will

support the “Make in India” initiative.

Increase health-care spending to 6% of GDP

India’s drastically low health-care spending must be increased through targeted, outcome-based

stimulus. The pandemic has starkly illustrated India’s inadequate health-care spending, hovering

near 3.6% of GDP, according to the Organization for Economic Cooperation and Development
(OECD). Other OECD countries spend an average of 8.8% of GDP, while the other BRICS

nations — Brazil, Russia, China and South Africa — are at 6.3%. To improve the skewed

distribution of medical facilities, India could provide incentives for doctors and entrepreneurs to

set up hospitals in rural areas.

Direct-benefit transfers could be in the form of skill credits for medical workers or enticements

to establish up medical colleges in villages.

The $5 trillion vision

The recent Union Budget proposed on the 5th of July 2019 began with a remark regarding the $5
trillion economy. The debate regarding the $5 trillion economy begins from this very remark as it
reflects the larger economic agenda of the newly elected NDA government. The document, to a
large extent, was a policy outline reflecting the stance of the government with regard to this and
the means that they are intending to employ in order to attain the goal of $5 trillion economy,
thereby putting India at the third place in terms of GDP only after USA and China.

The first means adopted by the government was structural reform. The undertaking of structural
reforms was a means to address issues of inefficiency. This was an area that the NDA had been
successfully made use of during their previous term. Tax reforms especially in terms of the GST
have transformed indirect taxation. Though it had a short-term negative impact, in the long run, it
has been envisaged to be beneficial for the growth of the economy. Several reforms in the area of
banking, bankruptcy, digitalisation and the like have worked towards simplifying functioning for
productive enterprises and the ease of living for individuals.

The budget makes an attempt to tap into the productive sectors of the economy and boost them in
ways that would enable further growth of the GDP. Sectors that are bound to produce assured
returns in terms of GDP growth have been targeted. The relaxation of the tax burden for
corporates by bring 99.3% of all companies under the 25% tax bracket, incentives and push for
start-ups and so on are some attempts. The budget even pointed out to a possibility of
commercialisation of space technology by the formation of a commercial wing at the ISRO. The
heavy push for the private sector and commercialisation can be seen as steps towards attaining
the $5 trillion goal.

The question that arises is whether India is capable of attaining this goal within the short period
of time stipulated. For $5 trillion to be attained, India essentially needs to double its GDP. The
former RBI governor C Raghuram Rajan has stated that for India to be able to attain this goal, a
sustained growth of 8% is required. The growth figures of India in the recent times have been a
little fuzzy with reports providing misleading statistics. Rajan also mentioned that with the
demand for welfare spending on the rise, there are limitations to the extent to which the
government can invest in the economy. The ability to attain this goal in such short period of time
is questionable.