In A World Starved Of Growth, India Is An Outlier, Will Become Third-Largest Economy In 5 Years: Amitabh Kant

Kant said the economy has emerged as a resilient powerhouse and demonstrated global growth at unprecedented levels. However, he noted that equitable growth remained a major obstacle for the country.

India is set to become the third-largest economy and stock market in the world in the next five years, G20 Sherpa and former NITI Aayog chairman Amitabh Kant said at the India Dialog conference, organised by the Stanford University US-Asia Technology Management Center, in partnership with the Institute for Competitiveness. 

Lauding the development of the Indian economy in the last decade or so, Kant said the economy has emerged as a resilient powerhouse and demonstrated global growth at unprecedented levels. However, he noted that equitable growth remained a major obstacle for the country. 

Recently, India released its GDP growth results for the third quarter in the current fiscal year at over 8 per cent, bypassing all expectations. Sharing his inputs on the country’s growth, Kant stated: “In the midst of a global slowdown, India has demonstrated its great ability to grow. We are an oasis of growth at a time when there is ...Japan, the UK, Germany, all of them are in a recessionary phase. India has emerged as a very resilient powerhouse, demonstrating global growth. According to IMF, India will contribute about 20 per cent of world economic expansion in the next decade. In a world truly starved of growth, India is an outlier and in the next 5 years, India will surpass both Japan and Germany to be the third-largest economy and third-largest stock market in the world. In India, it's a once in a generation shift in its economic position that is taking place.”

Kant noted that India has evolved from existing in the Fragile 5 economies to taking its place in the Top 5 in the world. He added that India was suffering through a major issue of a ‘twin balance sheet’, which plagued both the corporates and the financial sector when the current Prime Minister Narendra Modi-led government came to power a decade ago. 

Kant added that during that time, all the banking institutions were suffering financial woes and there was also a challenge of both fiscal and current account deficits. To combat these issues, the country went through massive structural reforms in recent years, he said.

Reforms Undertaken By Govt

One of the major reforms implemented by India was the Goods and Services Tax (GST), Kant said, adding that implementing this tax remained equivalent to “Putting one tax across entire Europe, because India is bigger than the 24 countries of Europe plus another 30,000 km”. Kant stated that this was a cashless, paperless tax and has helped in enhancing the tax base in the country from 6.3 million taxpayers to nearly 14.5 million taxpayers. 

Another major reform undertaken by the country, he said, was a ‘modern insolvency and bankruptcy code’. Kant said this measure helped transform the credit culture in India and allowed firms that were not performing well to undergo a “proper process of dissolution”. 

Crediting the Real Estate Regulation Act (RERA), Kant added that it helped bring in more discipline and transparency in the real estate sector and also enhanced the growth of the industry. 

Further, by reducing the corporate tax, Kant said, the government succeeded in bringing “India’s corporate taxes to par with the world’s best”. This move, he noted, helped heal the balance sheets of the private sector. A focus on the ease of doing business in the country also helped not only attract the private sector but also enhanced and encouraged competition between the states, he stated. 

Technological Transformation

Calling these the ‘big-ticket reforms’ undertaken by the country, Kant pointed out that the technological transformation of India helped push ahead development in the country. “In India we took a very different approach, to create a public interest layer, and on top of this layer, we allowed the private sector to compete in the market space and this was open AI, and this was globally interoperable. And therefore, you have 1.4 billion people in India having a digital identity. Between 2015-17, India opened 550 million bank accounts which has not happened anywhere in the world. Just 18 per cent of Indian women had bank accounts, today almost 91 per cent women have a bank account,” he noted. 

Kant stated that this digital evolution also helped India in handling finances during the COVID-19 pandemic and distributing money to the beneficiaries without any leakage. “What happened during COVID-19 is India could straight away put in the money in the bank accounts of the beneficiaries. Within two weeks, we put money into the bank accounts of 341 million Indians, and then we put money into over about 110 million Indian women. There was no leakage in India. Today there is no leakage in India because India has become a productively, very efficient economy because today we are putting money from the government straight into the beneficiary’s account,” he noted. 

This technological growth led to the growth of the start-up sector in the country, Kant stated, adding that young firms like Zerodha, MobiKwik, Acko, and many others are taking the services of the financial sector straightaway to the customers in a seamless manner. 

Infrastructure

In terms of infrastructure growth, Kant pointed out, “In the last 8-9 years, India has made 40 million houses for its people and it means it has actually created an Australia, its more than the population of Australia. It has provided 110 million toilets, which is more than the population of Germany. We have provided piped water connection to 253 million people which is like giving piped water connection to every single citizen of Brazil. It took the capex of its GDP from 1 per cent to close to 4 per cent. Post-covid, instead of pursuing a consumer-led strategy, it pushed for a capex-led strategy and I think it made a huge difference on ground therefore, my belief is that infrastructure creation will lead to spiralling of growth in the subsequent years of India’s economy.”

Challenges

Kant noted that while the country exhibited tremendous growth in the recent years, it still faced certain challenges, which can rather be treated as huge opportunities. Talking about equitable growth, he stated, “It can't be that India is growing on the back of the southern part of India or the western part. India needs to grow in an equitable manner, therefore the eastern part of India needs to grow. They are the mineral-rich states of India and my belief is that Bihar, Chhattisgarh, Jharkhand, Rajasthan, Madhya Pradesh, all these states must grow to enable India to grow at 10 per cent.”

Elaborating on India’s goal to become a $35 trillion economy by 2047, Kant called on the states to up their efforts to become the ‘leaders of growth’ and follow in the Centre’s footsteps. 

With the slowdown in global trade, the official noted that all economies have grown on the back of global trade. He pointed out that India’s share in the trade remained very low and the country needed to boost exports. To achieve this, he pushed for a focus on the manufacturing sector. 

“India needs to manufacture again in size and scale to penetrate the global markets in a big way. It can’t be that India is growing only on the back of services. India needs to fire on all cylinders, it needs to become a manufacturing nation. More than anything else, India needs to enhance its agricultural productivity. India’s main problem is that there is a very high population dependent on agriculture, you can’t have 20 per cent of your economy coming from agriculture. You need to take it from agriculture to manufacturing to urbanisation.”