Indian economy can grow consistently at 8% for the next 20 years leading to the generation of up to 1.5 crore new jobs and bringing out 3.5 crore people out of the poverty every year on the basis of the capital investment strategy of the government, Union Minister Ashwini Vaishnaw said on Saturday.
Addressing the annual general meeting of Assocham, he said that the government had set a target of increasing the capital investment level in the budget from 27% of the GDP to 35% of the GDP over the next few years.
“We follow the strategy of capital investment for 5-6 years more, we can grow at 8% consistently for the next 20 years. 8 growth in the next 20 years means, every year close to 1-1.5 crore new employment, 30-35 million people coming out of poverty. That’s the change we can bring in our society by that thought process,” Mr. Vaishnaw said.
The Minister said that India had been a consumption-led economy in the past and the Prime Minister had taken a “path of faith” to increase capital investment despite reluctance from several economists.
“Many of the European countries followed the prescription of the noble laureates and they are in a very bad situation. We decided to choose the path which had three elements – public investment, very focussed consumption and reforms, and incentives for private industries,” Mr. Vaishnaw said.
He said Germany, the U.S., Japan, China and South Korea had followed the same path of capital investments for several years.
The Minister said the country’s nominal GDP at the end of the financial year 2021 was ₹198 trillion and the target was to reach ₹225 trillion.
“In this ₹198 trillion economy, close to ₹116 trillion came from consumption which is about 59% of the GDP and ₹53 trillion came from investment, which is only about 27% of the GDP,” the Minister said. The government, after analysing that its liability is about 60% of the GDP, decided to go for increasing capital investments.
Mr. Vaishnaw said that the Centre roughly got ₹20 trillion as gross tax revenue and net tax revenue, after taking out state government share, is about ₹15 trillion and non-tax is about ₹3 trillion.
About ₹18 trillion is the total receipt that the government of India gets on the revenue side,” he said.
The Minister said that the government, in last year‘s budget made a capital investment of ₹5.5 trillion.
He said that the GDP target surpassed the ₹225 trillion target and reached ₹232 trillion.
The Minister said that the result of ₹5.5 trillion was 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 go to the MSME sector and close to ₹10 trillion will go as wages and salaries which lead to people spending in several sectors.
The Minister said that people who are in the brick and mortar industry may have seen that the factory capacity utilisation was around 60-70% a year ago, which has now reached about 80-85 (%) and in some sectors it has reached 90-95% where people are now planning setting up new facilities.
