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Quality Over Speed: India’s Quest For A $5 Trillion Economy

Chief Economist of Bank of Baroda Madan Sabnavis envisions a future where the private sector plays a pivotal role in creating employment and ensuring prosperity is accessible to every stratum of society

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Amit Shanbaug
January 23, 2024
India’s Quest For A $5 Trillion Economy

India’s Quest For A $5 Trillion Economy

India stands at the crossroads of economic aspirations, where tradition converges with the pursuit of becoming the world’s third-largest economy. Chief Economist of Bank of Baroda Madan Sabnavis, during his special address at the Outlook Money Retirement Expo 40After40, wisely directs our attention to the importance of the quality of economic growth rather than the speed of its progression.

Presently occupying the fifth spot with a robust Rs 300 lakh crore economy, India aims to touch the Rs 400 lakh crore milestone. However, Sabnavis urges us to consider not just the numbers but the per capita income, currently standing at a modest $2400 per head (approx. Rs 178,000). This highlights a critical need for equitable distribution of economic benefits, as nations with lower economic rankings boast significantly higher per capita incomes.

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Sabnavis brings attention to reducing the number of people below the poverty line, emphasising the role of government social welfare subsidies. While these initiatives, ranging from free power to enhanced healthcare, have proven instrumental, questions loom over the sustainability of such extensive spending. With the fiscal deficit currently at 6 per cent of gross domestic product (GDP), equivalent to borrowing Rs 18 lakh crore, balancing social welfare with fiscal responsibility is challenging.

The need for public sector investment is underscored by Sabnavis, noting a decline from 34-35 per cent to 28 per cent, primarily due to reduced demand. This dip in demand for goods and services is intricately tied to lower consumption and income levels. To revitalise the economy, the private sector must take the lead in job creation. Currently, only 12 per cent of the 450 million employed are graduates, limiting income potential for the remaining 88 per cent. Industries like the IT sector are experiencing layoffs, and the public sector is primarily replacing retired staff, further deepening the job crisis.

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While India has successfully controlled its population growth from 3 per cent to 1 per cent, promising a higher quality of growth, the emphasis must now shift to generating sustainable income for all citizens. Sabnavis envisions a future where the private sector plays a pivotal role in creating employment opportunities and ensuring prosperity is accessible to every stratum of society.

Sabnavis’s insights shed light on the complexities and opportunities ahead for India in its quest for a $5 trillion economy. Balancing growth with inclusivity and fiscal responsibility will be the key to transforming aspirations into a sustainable and equitable reality.

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