$5 trillion economy possible? Subramanian Swamy gives his opinion before Budget 2020

BJP's Dr. Subramanian Swamy opined on the the possibility of India reaching the $5 trillion target by 2024, just hours ahead of Finance Minister Nirmala Sitharaman's Union Budget 2020 presentation. Responding to a Twitter query, the BJP leader noted that anything is 'possible' in economic, however, in contrast also stated that it is not 'probable' to achieve the target. To reach the benchmark of $5 trillion, Swamy said that there needs to be a 18.6% growth in the GDP per year, a 13.8% rise than the current number. 

In a tweet, he said, "Now since only 4 years to go it needs 18.6% per year GDP growth rate. Possible? Anything is economics is possible. Probable? No!"

Chief Economic Advisor Krishnamurthy Subramanian on Friday, presented the Economic Survey 2020 which spoke of how difficult 2019 was for the Indian economy. In the Survey's volume-2 - 'State of the Economy', it details how the world's growth shrunk to 2.9% in 2019 due to protectionist tendencies. Amidst this global slowdown, India too has witnessed a GDP slump to 4.8% as opposed to 6.2% which was the expectation.

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Which factors pulled down India's growth?

Listing the factors which pulled down the Indian economy, the Economic Survey states that  decline in real fixed investment due to sluggish demand was the main reason behind the declined growth in the second half (H2) of 2018-2019 and first half (H1) of 2019-2020. Moreover, imports contracted more sharply than exports while inflation rose from 3.3% to 7.4% by December 2019 due to temporary increase in food inflation - suggesting demand pressure. The contribution of industrial activities to GVA has also declined from 2009-14 to 2014-19 due to the slump in Munaufacturing sector and the slump in 'Agriculture and allied' areas due to relatively higher growth performance of tertiary sectors.

In an attempt to boost demand, 2019-20 has witnessed significant easing of monetary policy with the repo rate having been cut by RBI by 110 basis points, implementation of  Insolvency and Bankruptcy Code (IBC) and easing of credit for stressed real estate and Non-Banking Financial Companies (NBFCs) sectors. Based on first Advance Estimates of India’s GDP growth for 2019-20 recorded at 5 per cent, an uptick in GDP growth is expected in H2 of 2019-20, states the Economic Survey. It also advises the government to use its strong mandate to introfduce reforms to strongly rebound in 2020-21. The survey also estimated that based on  India's growth with macroeconomic stability over the last five year (Avg GDP: 7.5%, Inflation: 4.5%), the economy can rebound to $5 trillion goal.

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