The Indian economy can grow steadily at 8% over the next 20 years, which will create up to 1.5 million new jobs and lift 3.5 billion people out of poverty each year, based on the government’s capital investment strategy, des Union Minister Ashwini Vaishnaw said on Saturday.
Speaking at Assocham’s annual general meeting, he said the government had set a target of increasing the level of capital investment in the budget from 27% of GDP to 35% of GDP over the next few years.
“We will continue to pursue the investment strategy for another 5-6 years, we can grow steadily by 8% over the next 20 years. 8 Growth over the next 20 years means almost 1-1.5 million new jobs and 30-35 million people lifting out of poverty every year. That’s the change we can bring to our society through this thought process,” said Mr. Vaishnaw.
The minister said India has historically been a consumption-led economy and the prime minister has embarked on a “path of faith” to increase capital investment, despite the reluctance of several economists.
“Many of the European countries have followed the recipe of the Nobel Prize winners and are in a very bad situation. We have chosen the path that consists of three elements – public investment, highly focused consumption and reforms, and private sector stimulus,” said Mr. Vaishnaw.
He said Germany, the United States, Japan, China and South Korea have followed the same path of capital investment for several years.
The minister said the country’s nominal GDP at the end of FY2021 was £198 trillion and the target was to reach £225 trillion.
“In this £198 trillion economy, almost £116 trillion came from consumption, which is about 59% of GDP, and £53 trillion from investment, which is only about 27% of GDP,” the minister said. After analyzing that its liability is about 60% of GDP, the government decided to increase capital investment.
Mr Vaishnaw said the center received about £20 trillion as gross tax revenue and net tax revenue after deducting the state government’s share is about £15 trillion and non-tax is about £3 trillion.
Approximately £18 trillion is the total revenue that the Indian government receives on the revenue side,” he said.
The minister said the government made a capital investment of £5.5 trillion in last year’s budget.
He said the GDP target surpassed the ₹225 trillion target and reached ₹232 trillion.
The minister said that the result of ₹5.5 trillion is now visible and based on the result, the government decided to increase the capital investment to ₹7.5 trillion.
“This will add £22.5 trillion to the Indian economy,” Mr Vaishnaw said.
He said that the way our economy is structured, ₹13 trillion will flow to the MSME sector and almost ₹10 trillion as wages, resulting in people spending in multiple sectors.
The minister said that people working in the brick and mortar industry may have seen that a year ago, the factory’s capacity utilization rate was about 60-70%, which has now reached about 80-85 (%) and in has reached 90-95% in some sectors, where people are now planning to set up new facilities.