It was in January 2018 at Davos, Switzerland, that Prime Minister Narendra Modi had first spoken about his ambition of seeing India as a US$5 trillion economy by 2025. “We are moving towards becoming a 5 trillion US dollar economy by 2025,” Modi said in his trademark oratory at the Wold Economy Forum’s annual event whose theme was ‘Shared Future in a Fractured World’. About a year and half later, Modi reiterated the target at Niti Aayog’s governing council meeting in New Delhi in June. On July 5th, finance minister Nirmala Sitharaman spoke about the $5 trillion target in her 2019 Budget. “Our economy was at approximately US $1.85 trillion when we formed the government in 2014. Within five years it has reached US $2.7 trillion. Hence, it is well within our capacity to reach US $5 trillion in the next five years,” the finance minister said in her speech. This means growing in nominal term at the prevailing rates of growth by 85 per cent in five years.
The target is not difficult to achieve if India grows between 11 to 12 percent per annum in nominal term, provided the rupee hovers around Rs 70 against dollar and inflation stays at around 4 per cent. In real GDP terms, India will have to grow between 7.5 to 8 per cent over the next five years to reach the $5 trillion mark by the end of FY-2024-25. This is easily said than done, though. Sustaining a real GDP growth of 8 per cent will be a big challenge, given the weakness in ‘virtuous cycle’ of savings, investment and exports. Investment, particularly private investment, is the key driver that drives demand, creates capacity, increases labour productivity, introduces new technology and creates new jobs. But to revive private investment cycle, India will have to revive consumption. Unless consumption picks up, businesses will not invest in new capacity utilisation. With unemployment at four-decade high and rural economy in distress, it is hard to see private consumption getting a trigger anytime soon.
While the key to achieve the $5 trillion goal is radical policies and transformational reforms on which the government is yet to make a decisive move, the focus on achieving the target by 2024-25 takes away the spotlight from real well-being of average Indians by the end of Modi’s second term in office. Therefore, the question is: what will be India’s real per capita GDP in rupee terms by FY 2024-25? And what will be the purchasing power of an average Indian’s income in rupees? However, while there is little clarity on this, the $5 trillion goal has become a slogan for the government. It has therefore started a debate among economists and analysts on the challenges and possibilities of India reaching the target. In this context, noted industrialist Adi Godrej’s recent observation that all is not well in the country and his slew of concerns on the social front is a warning that cannot be ignored.
Even if the goal looks achievable with the government proposing some incremental steps to boost infrastructure and encourage economic growth, there are other challenges which lie outside the realm of economic policies. These include intolerance, hate crimes, moral policing, gender crimes, social instability, caste and religious violence, water crisis, pollution and poor public healthcare, which, according to the chairman of the Godrej group can seriously jeopardise India’s economic growth and prevent the country from realising its potential.
While he acknowledged India among the world’s fastest-growing economies and Modi’s vision of India becoming a $5 trillion economy, he was also sceptical of sustaining this growth. “With the growth vision and dreams firing away, it’s not a rosy picture as yet. One must not lose sight of the impoverishness that still massively plagues our nation,” he pointed out. Apart from soaring unemployment, and severe intolerances which are rampant, Godrej said chronic water shortage, air pollution, indiscriminate industrialisation, growing use of environment-damaging plastics and crippling medical facilities (with India’s healthcare spend being the lowest among its market peers) are other issues that need to be tackled on a war footing.
Industrialists and businessmen generally swim with the tide; they are not known to make critical comments on issues for fear of a backlash that will have a negative impact on their business activities. It is also true that the chief concern of businessmen is to make a profit in a market economy and, therefore, often tend to laud the powers-that-be. But some have bucked the trend, however few and far between, and lived up to a more pressing conscience and spoken truth to the political power. Infosys founder N R Narayana Murthy is one of them; he recently expressed his unhappiness at “what is happening in different parts of the country today.” On an earlier occasion, Godrej had also spoken of the massive loss to livelihood caused by the official ban on beef trade.
There is a lot to learn from Godrej’s intervention. By articulating his concern and anxiety that transcends mere business self-interest, his observation is a warning to the nation of a rising menace which damages not only economic growth but also the democratic, social and lawful order of the constitutional republic. His concern is certainly more than mere profit-making when he draws attention to “impoverishness” that still “plagues the nation”. When harmonious co-existence is disturbed and society is divided on caste and communal lines which results in violence, intolerance and hate crimes, it disrupts economy in several ways. Lack of stable social conditions has a negative impact on fresh investment, employment generation and overall economic activity and therefore on growth, as unstable social conditions allow people to play a limited role in economy.
In other words, social stability is important for economic development. There is also a link between religious beliefs and economy: dominant religious beliefs relating to vulnerable social groups such as women and marginalised castes have negatively impacted India’s growth over the last several decades. To put it in numbers, India’s per capita GDP increased by Rs. 133,613 over the last 60 years, from Rs 4,982 in 1958 to Rs 138,595 in 2018. However, if India discards religious beliefs that perpetuate caste and gender inequalities, it could more than double its per capita GDP growth of the last 60 years in half the time, according to an IndiaSpend analysis of a study called Religious Change Preceded Economic Change In The 20th Century. Therefore, it is important to heed what Godrej has said.
The author is an independent senior journalist