The government has laid out the path to a $5 trillion economy by 2024-25 in the recently released National Infrastructure Pipeline (NIP) report.
While giving a projection of the total infra capital outlay and the budgetary support till 2024-25, the central government has projected the country's Gross Domestic Product (GDP) to be around Rs 365.5 lakh crore by the end of that financial year. At Rs 71 a dollar exchange rate, as assumed by the government, the country's GDP in dollar term would be $5.15 trillion. Even if the dollar exchange rate is around Rs 73, the economy would still be at $5 trillion.
The government expects the GDP to grow at an average nominal rate of 12.2% over the next five years to 2024-25, an uphill task given that by the government's own admission the economy is likely to grow at nominal rate of 8% in the current financial year, a sharp climb-down from its own budget target of 12% nominal growth rate.
For the next financial year (2020-21), the government is aiming at 10.5% nominal rate of growth of the economy, and from 2021-22 onwards, it expects the growth rate to be upwards of 12%, touching 13% in 2024-25.
Even considering 4.5% inflation, the government expects the real GDP growth rate to be around 6% in the next financial year, touching 8.5% in 2024-25.
The nominal GDP is calculated on the current prices of the goods and services instead of the price of the base year (real GDP growth), thus taking into account the inflation.
This is a bold statement by the government despite economists and analysts across the board raising doubt over the $5-trillion economy target by March 2025. The latest to cast aspersion on the ambitious target is Chairman of State Bank of India Rajnish Kumar.
Answering media query on the sidelines of an event in Hyderabad, Kumar said: "We will definitely achieve (the $5 trillion target), there is no doubt. Timeframe, I am not certain. Whether we'll achieve in five years, it is like, a very difficult question to answer."
In an interview to Business Today, former Finance Minister P Chidambaram even said that economy is growing at merely 3-3.5% (real rate of growth) instead of the official figure of 4.5%.
In the first two quarters of the current financial year, the GDP has grown at a real rate of 5% and 4.5% respectively. The nominal growth in the second quarter was 6.1% down from 8% in the first quarter.
The government had earlier budgeted for the country's GDP to grow from Rs 190 lakh crore at the end of 2018-19 to Rs 211 lakh crore. However, in the NIP report it has revised its GDP target to Rs 205 lakh crore.
The NIP report spells out the government's Rs 102 lakh crore infrastructure spending plans by 2024-25 to achieve the target of $5 trillion economy by that year.
Path to $5-trillion economy: