India's 5 trillion dollar economy by 2025 - Opportunities and challenges

India’s recent announcement of a USD 5 trillion economy by 2025 is being debated much. Can India do it? While the Government seems very optimistic and confident, a section of economists has expressed their reservations. Are they really ‘professional pessimists’. The size of China’s economy today is around USD 12 trillion. Presently India’s GDP is USD 2.7 trillion. China was at that level in 2006 and in 2009 China reached USD 5 trillion i.e. in 4 years’ time with real GDP growth rates of 12.7%, 14.2%, 9.7% and 9.4% respectively. India is not expected to clock such high growth rates over the next 5 years. Can we then reach USD 5 trillion in 2025? A key player would be India exchange rate. We are a major importer of oil. As the country migrates to electric mobility, India’s dependency on oil imports would reduce substantially and that would certainly improve the exchange rate.

In 2005, China was at USD 2.3 trillion. They reached 5 trillion in 2009. Therefore, empirically it has been proved that GDP can be doubled over a period of 4 - 5 years with focus on infrastructure and manufacture. Obviously, the situation in 2019 is very different than the situation in 2005-06. China took advantage of manufacturing bases shifting from US and Europe and capitalized on the same to become world’s manufacturing hub. They built assembly lines of the size of football stadiums. In order to leapfrog to USD 5 trillion by 2025, India needs to invest heavily in infrastructure and in promoting manufacture.

The population factor:

World’s population in 2005 was 6.5 billion and the same is expected to increase to 8.1 billion in 2025. The highest contributors to this increase in population (i.e. 1.6 billion = 110 crores) would be India and China. Now think of the incremental food, housing, transportation, infrastructure and recreational needs of this increased population! How many salons would be required to provide hair cut to this population!

Embracing technology:

India has its own resistance in adopting changes. We catch technology at the sunset stage and allow other nations to become manufacturing bases of such technologies. When the whole of Europe and China were setting up large scale solar power plants, we didn’t act. We took years to bring in mobile phone technology and allow manufacturing of defence equipment for security concerns. The end- result is today’s reality – India is highly dependent on imports. While the Modi government is working hard to encouraging manufacture in India under the ‘Make in India’ programme, it is very difficult to repair the damage caused by past actions.

Six major technologies will shape the world in next 30 – 50 years. These are as follows:

1. Renewable energy (solar, wind and tidal);
2. Electric mobility;
3. High-yielding seeds and crop protection;
4. Water and air purification;
5. Solid and bio waste management; and
6. 5G voice and data services.

India needs to be highly savvy about these sunrise technologies and encourage setting up research and manufacturing facilities in these fields. South Korea has already allowed 5G technologies in Seoul and I was stunned by the features of dual screen 5G phones – how much they can do! Hyundai has launched its first long range all-electric vehicle in India yesterday which can run 452 km with a single charge. The world is changing fast.

Demographic mileage:

How many new electric cars would be required for 10 billion population? If I take 1 billion as a safe number, it means one billion lithium cell batteries also. Can India produce a major share of these batteries and cars? Think about the number of charging stations needed to charge these batteries.

Social infrastructure:

Till now, I have dealt with physical infrastructure only. However, a country cannot prosper without commensurate social infrastructure. Can India educate and upskill its people? Can we produce the required number of engineers, doctors, accountants, technicians, nurses and other professionals who will leave their mark every day with service quality?

Can we build world-class tourist facilities where people will feel safe and secured? Can we create mega facilities catering to Yoga and rejuvenation where people from all across the world would come to get recharged? Can we beautify our waterbodies and preserve the flora and fauna that is unique to India?

A better India, a better world:

A USD 5 trillion economy will certainly usher in a lot of prosperity for Indians. Many will own 2, 3, 4 apartments and have multiple family vacations every year. All that is good and welcome. However, whether India becomes a great nation will depend on how well the security guards, drivers and maids are treated and paid. Whether their children are educated and can change their lives. In addition to focusing on physical infrastructure, government needs to carefully focus on social infrastructure – in providing food to the poor, healthcare to the needy, education for the youth and re-skilling its population to be relevant to the New India. No doubt it’s a daunting task but I have high hopes on the people of a country who have made remarkable progress in the last 72 years since India’s independence in 1947. A prosperous India will lead to a prosperous world.