Modi’s $5 Trillion Economy Dream Might Remain A Dream After All
The inflation numbers are in and they don’t look pretty — neither for the economy nor for our Prime Minister Narendra Modi’s goal to make India a $5 trillion economy by 2025.
What Happened?
The data released by the National Statistical Office (NSO) showed that the country’s retail inflation has hit a 5.5 year high in December. Also, Wholesale price-based (WPI) inflation came at 2.59% during the same period as compared to 0.58% in November.
How Did We Get Here?
Mostly because of the surge in vegetable prices
Vegetable prices have been rising for quite some time, especially the price of onions is breaking the ceiling of literally everything because it surged 455.8% in December versus 172.3% a month ago. Since onions were becoming expensive, people were turning towards eggs, milk and fish (sorry vegans!), which in turn was making the prices of these products surge as well. (In case you’d like to read about the impact of onion prices on the economy, we wrote about it here)
But vegetable prices aren’t the only thing standing between Modi and his goal to create a $5 trillion economy by 2025.
There Is The Unemployment Rate
The Centre for Monitoring Indian Economy (CMIE) said that the unemployment rate of India rose to 7.7% in December, which is marginally higher than the 7.48% recorded in the previous month. The urban employment surged from 8.89% in November to 8.91% in December 2019. Unemployment leads to a lot of problems such as exploitation of labour, political instability, rise in poverty etc., and none of these effects look good for our economy now.
Also, There Is The GDP Estimates
Last week, NSO released the first advance estimates of the national income and it said that our country’s GDP has been projected to decline to 5% in the current fiscal, which is an 11-year low. (If you’d like to read more about how our country’s growth compares against the other major countries, read it here)
Now, this news worries us. Because, if India has to achieve the $5 trillion goal by 2024–25, then it has to grow faster than what it grew at an average of 7.5% in the last five years. And no, we’re not saying this — our country’s Finance Minister Nirmala Sitharaman gave this statement.
#FYI: Right now, India’s GDP is currently estimated to be around $2.8 trillion. And EY’s latest edition of Economy Watch released in August 2019 said that the country has to grow by 9% every year for five years continuously and raise aggregate investment rate to 38% of GDP to achieve the $5 trillion economy target.
And, with all the graphs pointing downwards, we don’t know how we will achieve that goal. For now, all we have to do is wait for the Union Budget in February and hope it includes measures to help revive the economy.
