PM Modi’s recent speeches in the US made the intentions of the government very clear— it wants grow India's economy to double the current size which $5 trillion by the year 2025, making it the fourth largest economy after the US, China and Japan. But, there seems a dissonance in what the government is planning and the situation at hand in the country.
India’s GDP growth rate for the last quarter has fallen to 5% as per the last quarter findings -- which is not good news for the country because this is the slowest GDP growth for June in over 6 years. Although, the growth rate is still decent compared to global benchmark, but may not be enough to propel the country towards the 5 trillion economy mark any time soon. According to experts, the economy must see a nominal GDP growth rate of 12% to witness such enormous growth, which is way above RBI’s economic growth forecast of 7% for the economic year 2019-20.
The uncertain economic conditions triggered by fears of global recession has made it even more challenging for the Modi government. Nevertheless, it seems PM Modi’s recent speech in the US has highlighted the right vision for the country in terms of the direction in needs to take. So, one might wonder what the government can do to bring the promise of $5 trillion economy.
Modi's Support For Startups Is A Big Move Towards The Target
Policy regulation is another area where the government needs to make sure innovation is not hampered as it is the main source of economic growth. Here, the government’s push to ease regulations for startups as well as remove angel tax (after years of pleas) is a move in the right direction. The government’s stance on startups is appreciative and reflects that the government has recognised startups play a critical role in driving innovation and economic growth for the future. “Our youth are the largest users of the app economy. From food to transport, from movies to hyperlocal delivery, startups are easing everything. Thus if you want to invest in startups in a huge market, come to India,” said PM Modi at Bloomberg Global Business Forum in New York recently.
Apart from startups, opening up foreign direct investment for particular sectors, reduction in corporate taxes, ensuring credit momentum to non-banking institutions, taking back the tax surcharge on foreign investors, single tax system, consolidation of public banks are all great steps to make the economy more efficient, say experts. PM Modi at Global Business Forum in New York also recently said “We have removed 50 policy laws hampering development, this is the beginning,” which is reassuring for innovation.
On the other hand, there are instances where it has not done enough for technology companies. Take for example, the digital currency market, which is a hotbed for VC funding currently, lies banned in India despite repeated negotiations. Same goes for the data localisation law which has made it much more challenging for technology companies. According to experts, data laws should be focused on security standards and not where data is stored, pointing to the fact that the government needs to strengthen its security standards to prevent attacks. The argument is that there is clearly a need for making state tech infrastructure more secure, given the entire Aadhaar database had been hacked more than once.
What To Do About The Climbing Unemployment Rate?
India’s unemployment rate has climbed a 3-year peak of 8.4 per cent in August 2019, according to the data by think-tank Centre for Monitoring Indian Economy (CMIE). According to a report, The State of Working India 2019, 50 lacs Indians have lost employment since 2016. But, more than the government, economic cycles of the market market may have played a big role in this situation. The bad news is recession coupled with automation may see more job cuts in the coming days, particularly in industries where repetitive processes are involved. The reason is Indian companies will focus on cost optimisation by using automation tools. The major task of the government in the case is to ensure other routes of job creation with investments in infrastructure.
The major aspect of the growth will be skilling the youth, which forms the majority of the working population. The technical talent has been India’s biggest contribution to global innovation. One million young people joining the workforce every month, the opportunity for India will be great once it recovers from the current recession. While it may seem a scary scenario when it comes to employment generation, with investments in new technologies, the demand for new skills will also rise. In the age of automation, skill development will become more imminent, according to research.
If the government established the right education and skill development platforms for the youth which are based on advanced technologies like data science, artificial intelligence, blockchain, cloud computing, IoT, etc. The government’s focus on developing skills among the youth will spur employment opportunities. The workforce will be reshaped to accommodate talent with focus on newer technologies such as artificial intelligence, blockchain, internet of things, etc.
Monetary Policy Will Be Another Key To Achieving $5 Trillion Economy
The country has been seen rising situation of NPAs and credit defaults leading unto the non-banking crisis- a major cause of India’s current recession. To tackle this, the government can make use of artificial intelligence and machine learning to evaluate the most optimum credit disposal system, and one that does not rely on human judgement. Certainly, credit growth will remain an important aspect of financial growth, but advanced systems of credit will add great value to the economy in ensuring it doesn’t get damaged further.
To achieve the target of making India Inc a $ 5 trillion economy will be no easy feat especially in an uncertain global economic scenario. The government therefore has to play an active role in making sure the nation garners enough investments which are then put to use for building an innovation-led infrastructure. The massive investments in the infrastructure and business initiatives would naturally create enough jobs in future given there is no skill imbalance. PM Modi’s vision of making India an economic powerhouse will only come together when there are a multitude of right steps taken concurrently in this direction.
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Vishal Chawla is a senior technology journalist at Analytics India Magazine, and writes on the latest trends in the world of analytics, AI and other digital technologies. Prior to Analytics India Magazine, he was a senior correspondent for IDG ComputerWorld and CIO India. Vishal can be reached at firstname.lastname@example.org