On Track, Despite Hiccups

To say that the last couple of years has been challenging will be a gross understatement. These have been unprecedented times and uncertainty still looms large. Despite this, the one goal that is high on India’s radar is achieving the USD 5 trillion GDP target. It might seem an uphill task but remains well within reach. 

The pandemic notwithstanding, what’s not lost is hope and the indomitable spirit of the people to double down on not only the path to economic recovery but all-around development leading to a USD 5 trillion target in the next five years. 

The GDP Growth Ups and Downs 

The economic activity had come to a grinding halt due to lockdowns imposed to prevent the spread of Covid-19. In fact, in 2020-21 the country’s GDP fell by 7.3 per cent. This was not an isolated case of the economy shrinking, with the USA reporting 3.5 per cent, UK 9.8 per cent, and France 8.1 per cent decline in GDP during this period. The relaxation of lockdowns, availability of vaccines, and new government initiatives is helping keep the USD 5 trillion GDP goal in sight. 

During very tough times business leaders across India have revisited their strategies to get on the growth path. For instance, in aviation, many commercial airlines added cargo to their portfolio. Multiple industries including automobiles, banking, and manufacturing accelerated their digitisation efforts to ensure business continuity. Ecommerce and digital payments saw accelerated adoption as consumers shifted to safer and new ways of doing transactions. Overall, business activity continues to grow and augurs well for the country’s economic outlook. 

The Right Moves 

India is currently the world's sixth-largest, and over halfway already towards the government’s target of a USD 5 trillion economy. Transformational government initiatives like Gati Shakti are helping accelerate economic activity. Gati Shakti, a Rs 100 crore project aims to usher in integrated planning and decision-making across various ministries and departments including railways and roadways. 

The country’s petrol and diesel consumption level is now higher than pre-Covid, signalling a faster than expected recovery. The stock market has risen by 250 per cent from the March 2020 lows to touch the 62,000 mark. 

The government has given several standard operating protocols to the industry to accelerate growth. The production-linked incentive (PLI) schemes will not only boost local manufacturing but also create new jobs, and safe forex by reducing imports besides making Indian industry export competitive. For example, the semiconductor policy announced by the government in December 2021 gives an incentive of USD 10 billion (Rs 76,000 crore) for setting up fab units (chipmaking) that will help the country become self-reliant in this much-needed hardware which today goes into everything from cars to rockets to toasters and washing machines. 

MSMEs & Startups Driving Growth 

All sectors of the economy have to fire up to ensure faster and all-inclusive growth. Take the micro, small and medium enterprises (MSMEs). These were hit by the pandemic as much as any other sector. They have a vast network of around six crore units producing over 8,000 products and a share of 30 per cent in nominal GDP. Now they need government support to get back on the growth path and this is happening with steps like easier access to credit. 

The robust startup ecosystem has a huge role to play as well. Venture investors like SoftBank, Sequoia Capital, and Tiger Global Accel Partners are investing in startups which are fast emerging as a big growth engine of the economy, creating new jobs and accelerating economic activity. 

Who could have thought that 2021 will see 42 unicorns, the highest ever so far in India, and India would have 100 unicorns in 2022. According to a recent Nasscom-Zinnov report, India has 25,000 technology startups and more than 3,000 deep technology ventures. Startups employ 6.6 lakh people directly and have created around 35 lakh indirect jobs. This is also fuelling demand for new commercial real estate and high-tech office spaces ready to receive workers in the post-Covid world. Overall, startups will play a key role in accelerating economic activity as they have done in other economies. 

Larger than the Sum of the Parts 

No country has been able to achieve its full potential without all sectors firing up. The good news is that there are more than just green shoots of growth visible now, as has been demonstrated by not only the rapid bounce-back of stock markets from the lows but also rapid job creation. Rapid digitisation is ensuring that each engineer now has at least three job offers, a good sign to not only expand our output of engineers but also very telling about the growth happening in the economy. 

The pandemic has reset the business outlook and growth trajectories of businesses, economies and even individuals. With government initiatives to boost growth, the industry rising to the challenge and startups booming, the USD 5 trillion target looks to be on track.