In “The Indian Economy: A Review” report, which was released just before the finance Minister Smt. Nirmala Sitharaman presented the interim budget on 1st February 2024, the government projected the Indian economy to reach $5 trillion at current prices by 2027 and become the world's third largest economy & it seems realistic too.
According to the International Monetary Fund (IMF), India's GDP at current prices is currently $ 3.73 trillion, while USA's GDP at current prices is $ 26.9 trillion and ranks first in the world, while China’s GDP at current prices is $ 17.8 trillion & ranks second in the world. In this order, Germany is at third place with GDP of 4.4 trillion dollars at current price and Japan is at fourth place with GDP of 4.2 trillion dollars at current price.
Purchasing Power Parity (PPP) yardstick is also used to measure the strength of a country's economy, but this benchmark is not very popular. Under this concept, to compare the productivity and quality of human living between two countries, a comparison is made between the services and products of two or more countries along with the purchasing power of their currencies, so that a person can Purchasing power is revealed. If a person's hair cutting is done for 170 rupees in India and for 2 dollars in USA, then here 170 rupees is equivalent to 2 dollars, that is, the price of the same service is the same in India and USA. This is called Purging Power Parity. In its calculation, both the price rate of the good or service and the exchange rate are considered. In terms of PPP, India was the third largest economy in the world in 2023 with a GDP of $13.119 trillion, while China was at the first place in the world with a GDP of $30.3 trillion. At the same time, USA was in second place with a GDP of 25.4 trillion dollars. However, India was ranked 140th in the world in terms of per capita income at current prices in 2023, while India was ranked 125th in terms of per capita income in terms of PPP.
GDP is calculated in two ways in India. Real and Nominal. The basis of calculation of real GDP is the base year 2011-12 and during this period, the value of goods & services is calculated according to the immediate price of goods and services, whereas under nominal GDP, the value of goods and services is calculated at the current price. The base year price is stable because it is price of earlier year, while the current price is subject to change. The total value of private and government consumption, investment, construction cost, produced goods and services etc., or the total value of all finished goods and services within a country's borders within a certain period is called GDP and it depends on the intensity of economic activities. It keeps increasing or decreasing accordingly.
India's GDP at current prices is estimated to be $ 4.10 trillion in 2024, $ 4.51 trillion in 2025, $ 4.95 trillion in 2026 and $ 5.42 trillion in 2027, while it was $ 3.38 trillion in 2022 and $ 3.73 trillion in 2023. The unemployment rate in India was 8.7 percent in 2023, while 7.3 percent in 2022. Since the Indian economy is growing strongly. Therefore, the unemployment rate may remain less than 8 percent from 2024 to 2027. The inflation rate in India will be 5.5 percent in 2023, while it will be 6.7 percent in 2022. However, during 2024 to 2027, it is estimated to be 4.6, 4.1, 4.1 and 4.0 percent, respectively. At the same time, the per capita income in India is estimated to be $ 3,668.2 in 2027, $ 3,374.8 in 2026, $ 3,101.8 in 2025 and $ 2847.6 in 2024, whereas it was $ 2,391.9 in 2022 and $ 2,612.50 in 2023. The ratio of government debt to GDP was 81 percent in 2022 and 81.9 percent in 2023, while it is projected to be 82.3 percent in 2024, 82.2 percent in 2025, 81.8 percent in 2026 and 81.2 percent in 2027.
Inflation and unemployment rates are under control in India. Also, per capita income is increasing steadily. On this basis, it can be assumed that the Indian economy will remain strong in the coming years also. Yes, the percentage of government debt as a proportion of GDP is high, but due to the increase in Goods and Services Tax (GST) and other tax and non-tax revenue collections, this percentage may come down slightly in the coming years.
Growth in Germany and Japan is expected to be less rapid than in India. At current prices, Germany's economy currently ranks third in the world. Its GDP was $ 4.03 trillion in 2022 and $ 4.12 trillion in 2023, while it is estimated to be $ 4.33 trillion in 2024, $ 4.54 trillion in 2025, $ 4.74 trillion in 2026 and $ 4.92 trillion in 2027. Inflation in Germany was 8.5 percent in 2022 and 7.2 percent in 2023, while it is projected to be 3.5 percent in 2024, 2.67 percent in 2025, 2.0 percent in 2026 and 2.0 percent in 2027. At the same time, the unemployment rate in Germany was 2.9 percent in 2022 and 3.4 percent in 2023, while it is expected to be 3.3 percent in 2024, 3.2 percent in 2025 and 3.0 percent in 2026 and 2027, respectively. The government debt ratio in Germany was 71.1 percent in 2022 and 68.3 percent in 2023, which is projected to be 65.6 percent in 2024, 63.1 percent in 2025, 61.0 percent in 2026 and 59.7 percent in 2027.
Japan's GDP at current prices in 2022 and 2023 was expected to be $4.23 trillion and $4.30 trillion respectively and was ranked fourth in the world. Japan's GDP is estimated to be $4.56 trillion in 2024, $4.81 trillion in 2025, $5.01 trillion in 2026 and $5.17 trillion in 2027. The inflation rate in Japan was 2.5 percent in 2022 and 3.2 percent in 2023, while it is expected to be 1.0 percent from 2024 to 2027. The unemployment rate in Japan was 2.6 percent in 2022, while 2.4 percent in 2023. At the same time, it is estimated to be 2.4 percent from 2024 to 2027. The government debt to GDP ratio in Japan was 263 percent in 2022, while it will be 261 percent in 2023. At the same time, it is estimated to be 260 percent in 2024 and 2025, and again 262 and 263 percent in 2026 and 2027, respectively.
Unemployment and inflation rates are low in both Germany and Japan, but government debt in relation to GDP is high in Germany, but it is very high in Japan. The main reason for the high per capita income in these two countries is the low population there, otherwise all the major parameters of the economy in India are much stronger than these two countries and are likely to remain strong in the coming years also.
The main sectors contributing to India's GDP are agriculture, industry, and services. Agriculture includes farming and related activities, the industry sector includes manufacturing and construction, and services include sectors such as finance, health care, education, and tourism. Therefore, to increase GDP, the government needs to reduce people's dependence on agriculture, increase the use of innovation in agriculture, strengthen the marketing system, change the habit of investing in gold, focus on research and development. Emphasis will be on skilling the youth, spending more money on education, avoiding distributing free food & money, making the weaker sections self-reliant, strengthening the infrastructure etc.
Exactly after 60 years from 1947, India's GDP reached $1 trillion in 2007 and increased to $2 trillion in 2014 and $3 trillion in 2019. In 2014, the Indian economy became the tenth largest economy in the world, whereas in 2019, within just 5 years, it became the fifth largest economy in the world.
At present, the annual pace of economic growth in USA is 1.58 percent, while that of China is 6.3 percent, Japan is 1.3 percent and Germany is 0.2 percent. At the same time, the growth pace of Indian economy is 7.2 percent. In such a situation, it would be appropriate to say that there is no exaggeration in the claim of Modi government that the Indian economy will become $5 trillion in 2027.
