EY India in its ‘optimistic outlook’ now sees the country’s economy reaching the target size by 2027-28
India’s target of becoming a $5 trillion economy by 2024-25 is likely to lag by about 3-4 years in the ‘optimistic or business as usual’ scenario, and may have to wait till 2029-30 in the worst case scenario. The outcome of the case as estimated by EY India.
According to the latest estimates by the International Monetary Fund (IMF), India is set to overtake China in terms of annual pace of economic expansion and become the global growth leader for the next five years starting from 2021-22. EY India’s macro-fiscal unit, the Tax and Economic Policy Group, used IMF projections to arrive at its estimates.
The IMF has projected 9.5% GDP growth for India this fiscal year, followed by 8.5% next year and the consulting head’s economy team, led by Chief Policy Adviser DK Srivastava, believed it to be moderate. Indicates real GDP growth of 6% over the period.
“This is still lower than the previous peak of the trend growth rate of 7% during the four years 2007-08 to 2010-11,” EY India said in a report. “Indeed, if we include the projected growth of 9.5 per cent for this year and 8.5 per cent for 2022-23, the trend growth rate jumps to only 4.9% by 2022-23,” it said. suggests a need. Initiatives to lift the trend growth rate to 7% or more in the medium term.
“As a point of reference, we consider the likely year by which the Indian economy will cross the $5 trillion mark in three alternative scenarios. In our benchmark solution, we use IMF projections for real and nominal GDP growth through 2026-27. Exchange rate estimates have also been taken from the IMF,” said the firm’s economists.
“In the pessimistic scenario, real GDP growth falls by 1 percentage point from 2022-23 as compared to the benchmark solution. Other parameters i.e. implicit price deflator-based inflation and exchange rate depreciation are kept at the same level as the benchmark solution. In this case, the crossover point moves forward one year to 2029-30,” EY said.
“In the optimistic scenario, real GDP growth has increased by 1 per cent starting 2022-23 as compared to the benchmark solution. In this case, India reaches the $5 trillion mark by 2027-28,” the EY team concluded in its October report in a chapter titled ‘India and the Global Economy as the Post-Covid Recovery Evolves’ .
‘Increase public spending’
Calling for accelerating public sector investment to help crowd out private investment, the EY called for the need to reverse the declining trend in the overall investment rate from a peak of 39.8% of GDP in 2010-11 to an estimated 29.3% in 2020. Emphasis on – 21.
“These trends indicate that more policy initiatives are needed to raise the trend growth rate to 7% or more,” it underlined.
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