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Is Arvind Panagariya’s 10% GDP Target For 15 Years Feasible?
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India is now being lauded as the leading light in the global growth race. Over the last couple of months, NITI Aayog vice chairman Arvind Panagariya has made quite a few statements about India's growth forecast in the next five years, 10 and 15 years.
On Friday (17 July), Panagariya exuded confidence that India could be an $ 8-trillion economy within next 15 years or even less if it continues with growth-enabling policies.
In April this year, Panagariya said that the Indian economy may grow at 8-10 per cent for the next 15 years, though the expansion may be higher in dollar terms. He went to add that if the economy actually grows at 8-10 per cent in rupees, in dollar terms it would be about 11-12 per cent and that kind of growth will turn India into about an $8 trillion economy from the current $2 trillion.
"Taking into account the real appreciation of the rupee, during the decade of 2003-04 to 2012-13, we've grown above 10 per cent per annum in real dollars. At this pace, we can turn the current $ 2-trillion economy at 2014-15 prices into an $ 8 trillion in the next 15 years or less. That would place us well above Japan, the No 3 economy now," said the NITI Aayog vice chairman.
The World Bank and the IMF as well as many analysts have predicted that the country would become the third largest economy after China and the US with a GDP of $ 10 trillion by 2030.
Global rating agency Moody's Analytics said India would grow 7.5 per cent in 2015. A Harvard study has projected India to achieve the highest annual GDP growth rate of 7.9 per cent over the next eight years, which is nearly double of China's growth of 4.6 per cent during the period.
The Organisation of Economic Development think growth could hit 8 per cent in 2016, returning India to the vertiginous heights of 2004 to 2012, when output averaged 8.2 per cent a year.
At present, it is high time to check whether this ambitious target is possible at all.
Belying expectations of an industrial recovery, India’s factory output growth slowed to 2.7 per cent in May as production of consumer goods contracted after a momentary pickup in April, signalling that rural demand remains fragile amid weak monsoon rainfall. Index of Industrial Production (IIP) growth for April, too, was revised down to 3.4 per cent from the provisional figure of 4.1 per cent released earlier.
In June, the services industry contracted for a second month as new business again declined, suggesting Asia’s third-largest economy is struggling to maintain growth, the Nikkei Services Purchasing Managers’ Index (PMI) survey showed.
The Narendra Modi-led National Democratic Alliance (NDA) government has been aggressive with its growth policies. This, however, hasn't translated into absolute growth figures as indicated by the aforementioned numbers.
To achieve the target of becoming a $8 trillion economy by 2030, India will have to grow at a CAGR of 9.86 per cent. It means India will have to consistently whip out near double digit growth for the next fifteen years.
However, the Modi government's promise of economic prosperity is not merely a political pledge. It is vital to secure the livelihoods of hundreds of millions of the country’s poorest. Growth over the past two decades is estimated to have already pulled 200 million out of poverty.