New Delhi: India has ambitious economic goal of becoming a $20 trillion economy by 2036. The target is achievable, but will demand increased economic growth, a stronger rupee and significant reforms in multiple sectors, latest report states.
The report suggests that India’s underlying growth rate of the rupee should be higher around 14.2%, compared to the current 10.5%. Meanwhile, the rupee should appreciate by approximately 3%-3.6% each year to get India to $20 trillion in dollar terms.
What reforms does India need?
The 20-point reform agenda has been proposed by Equirus including the services, infrastructure, human capital, capital markets and urban development and wider economy. The target is to expedite growth and generate greater investment and employment opportunities.
1. Bring fuel under GST
Bringing petrol and diesel fuels in the Goods and Services Tax system (GST) is one of key recommendations. This may ease taxes and make taxation easier and more uniform nationwide.
2. Increase state-level spending
The report has suggested the states to set minimum capital expenditure targets. The potential for increased spending on roads, transport, power and other infrastructure to support businesses and in turn improve economic activity.
3. Reform the Railways
Equirus has also proposed to list the Indian Railways. More market activity may have the potential to foster more investment and efficiencies in the sector.
4. Strengthen the corporate bond market
India should have more methods of raising funds in the business. The report recommends expanding the depth and breadth of the corporate bond market, allowing businesses to tap into long-term funding sources, rather than relying primarily on banks or the equity market.
5. Create a sovereign wealth fund
One idea is to establish a sovereign wealth fund to invest national resources and reap long-term rewards.
6. Invest more in education and skills
The size of India’s working-age population is an opportunity for them to become an economic asset only if they are equipped with the right skills. The report calls for more private investment in education and investment in human capital.
7. Increase private-sector R&D
More India should invest in research and development is needed. Private companies should be encouraged to invest in new technology and products, and for innovation, all of which would increase productivity and global competitiveness.
Services can become a major growth engine
Services sector is poised to be the main driver for India’s growth. New opportunities may be created in Technology, Global Capability Centres (GCCs), the healthcare sector, digital engineering, professional services and tourism sectors.
An additional area is tourism. Equirus estimates that India can increase its foreign exchange by an extra $21 billion annually by narrowing the tourism deficit with countries like Turkey.
Can India really reach $20 trillion?
The goal is highly ambitious and not assured. Some have doubted whether this level of growth and continuous rupee appreciation can be achieved given countries’ trade deficits and the need to import oil goods, among other factors, and the inflation and alterations in global trade conditions.
Overall, the Equirus report suggests that India cannot rely solely on any one sector. Improved infrastructure, education and skills, increased financial markets, more up-to-date services growth, increased research and improved governance will all be key.
Consistent implementation of these reforms has the potential to increase the number of jobs, investment flow, productivity and increase income, which will help India achieve $20 trillion economy target by 2036.
