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Modi's 5 Trillion Dollar Juggernaut

India is on a strong footing to achieve the five trillion dollar GDP mark by 2024-25.

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Be it the IHS Markit Manufacturing Purchasing Managers' Index (PMI), that recorded a reading of 55.3 for the month of January 2020, the highest in eight years, the hefty sum of Rs 1.10 lakh crore collected by way of GST revenues last month, or the number of 19.62 lakh new people who were added to the payrolls, as per the Employee State Insurance Corporation (ESIC) data for November 2019, there is a clear trend suggesting, emergence of strong green shoots in the economy. 

India is on a strong footing to achieve the five trillion dollar GDP mark by 2024-25, is further corroborated by a recent report by US-based think tank, "World Population Review", which says, India is the fifth-largest economy today in terms of nominal GDP with a size of $2.94 trillion, beating France at $2.71 trillion and the UK with a size of $2.83 trillion. The report further said that in purchasing power parity (PPP) terms, India's GDP is $10.51 trillion, exceeding that of Japan and Germany.

Applying the famous ‘Rule of 72’ to calculate the annual rate at which the Indian economy needs to grow to double its size in five years, we need to divide 72 by five. This gives us 14.4, which means, the Indian economy needs to grow at an average of 14% per year in nominal terms, over five years,to reach $5.4 trillion. This, in turn, implies real GDP growth of 10% and inflation in the region of 4-4.4%. Naysayers claim, even China averaged a growth of 9.5% per annum from 1992 to 2018. From 1961 to 2018, it hit 14% or more only seven times, but never more than twice in a row. However, comparisons are always odious and while the task at hand is challenging, Prime Minister Narendra Modi's 5 trillion dollar dream is both, realisable and realistic. Let people not forget that India's GDP grew by a healthy 7.4% in Modi's first term, despite world GDP barely growing by a little over 4%, in that period.

For India's GDP in the medium term to grow at 10% in real terms, infrastructure as a percentage of GDP should be in the region of 10-15%. The Modi government's Budget 2020 therefore, continues with its focus on this space.100 new airports will be set up under the UDAN scheme by 2024, carrying forward the existing momentum. Six airports have already been privatised under the Modi regime and privatisation of six more will be done soon. The Zurich International Airport recently won the bid to build a brand new airport for Delhi, while work on a spanking new airport for Mumbai is underway.

Again, big changes in city gas distribution are in many ways, spearheading the retail gas revolution. The 10th round of city gas distribution bids will cover 55-60% of Indian cities. The Mumbai-Nagpur super expressway received full funding of Rs 28,000 crore from banks and work is going on in full steam. To cut to the chase, the massive push outlined in December last year, with plans to invest about Rs 102 lakh crore on infrastructure projects by 2024-25, is in complete sync with the theme of Budget 2020. The five-year-long National Infrastructure Pipeline (NIP) that enters its 2nd year in the financial year 2020-21, during which Rs 19.5 lakh crore will be invested, reflects do-able ambition, that will be further buttressed by the proposed National Logistics Policy.

27000 km of rail track electrification, Rs 1.6 lakh crore worth of Capex allocation and Rs 70,000 crore of budgetary allocation for railways, operation of 150 passenger trains through the public-private partnership (PPP) model,developing 9500 km of coastal roads and 2000 km each of economic corridors and strategic highways, the proposed 148 km long Bengaluru suburban transport project at a cost of Rs 18600 crore with 20% central government equity and, focus on Krishi rail to enforce a cold supply chain for perishables, are some of the high points of Budget 2020, that will make India's 5 trillion dollar dream, a pleasant reality.

Additionally, Rs 22,000 crore in equity support to Infrastructure Finance Companies such as IIFCL& a subsidiary of National Investment & Infrastructure Fund (NIIF) and of course,100% tax exemption to sovereign wealth funds (SWFs) provided they stay invested for more than three years, as also making tax treatment of unlisted infrastructure investment trusts (InvITs) at par with listed ones, underpin the dynamic vision on infrastructure,by this government. SWFs like ADIA, along with the NIIF and another investor, have committed to buy a 49% stake in GVK Airport Holdings, which runs the Mumbai airport. Another SWF, GIC, in partnership with the Tata Group and another investor, will invest Rs 8,000 crore into GMR Airports, which runs India’s busiest airport in New Delhi.

Critics claiming the infrastructure roadmap lacks clarity on the funding aspect, have surely missed reading the fine print of Budget 2020. The Budget focusses on asset monetization and recycling with aims to monetize at least 12 lots of highway bundles of over 6000 km before 2024. The BJP led government had introduced Toll –Operate- Transfer (TOT) model in 2016, and since then, has successfully auctioned TOT bundles to private companies for monetizing public-funded highways. It is also actively pursuing the InvIT route of asset monetisation and the Union Cabinet has already approved a proposal from the National Highways Authority of India (NHAI) for the same. 

Besides infrastructure, the Modi government's focus on India's rural economy is commendable. The primary or agri sector provides employment and livelihood to over 50% of the country’s population but only contributes 12-13% of the GDP. With the aim of moving closer and faster towards the five trillion dollar target, India's rural economy, under the Modi regime, has increased the total outlay under the  Mahatma Gandhi National Rural
 Employment Guarantee Scheme (MGNREGS), from Rs 1.91 lakh crore between 2008-14 to a solid Rs 2.95 lakh crore between 2014-20, with agri-credit target pegged at a whopping Rs 15 lakh crore for the financial year 2020-21, alone. Funds allotted under the premier flagship scheme such as Pradhan Mantri Gram Sadak Yojana (PMGSY), rose by 39% to Rs 19500 crore.

On the corporate side too, measures like reducing the corporate tax rate from 30% to 22% and for new entities to even lower at just 15%, removing the dividend distribution tax (DDT), allowing 100% foreign direct investment (FDI) in single-brand retail, throwing open commercial coal mining to the private sector and,100% FDI under the automatic route in construction development, including townships, housing, and real estate broking services, are the harbinger of how reforms are an integral part of Modinomics.

Last but not the least, it would be apt to conclude by saying that, Prime Minister Narendra Modi's indefatigable vision of a $ 5 trillion behemoth is best captured by India's transformation from an economy of job seekers to that of, job creators. Since its inception, Pradhan Mantri Mudra Yojana (PMMY), with a total investment of more than Rs 10.6 lakh crore and, overall beneficiaries in excess of 21.57 crore people, is unarguable,the biggest entrepreneurial and employment generating scheme in the world. Schemes like PMMY, along with the ambitious "Ayushman Bharat", which has benefitted over 7 million Indians in less than two years of being launched, embody a healthier and wealthier India, in its quest for bigger goals.

Ms. Sanju Verma is an Economist, Chief Spokesperson for BJP Mumbai and Author of the Bestseller--"Truth & Dare-The Modi Dynamic".

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