Prime Minister Narendra Modi, while addressing the World Economic Forum in Davos (Switzerland) has first expressed his ambition to make India a US$ 5 trillion economy by 2024-25 on January 23, 2018 and was reiterated at the Governing Council Meeting of NITI Aayog in New Delhi in June 2019. Working towards the target, 2018-19 assumed an average real annual growth rate in gross domestic product (GDP) of 8% from 2020-21 to 2024-25 and an inflation rate of 4% implying a nominal growth rate of 12% and assuming an exchange rate of INR 75 per dollar in March 2025.
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India is the fifth largest economy in the world with GDP of around US$ 3 trillion in 2019-20. On making $5 trillion economy, the country will bypass Germany to become world’s fourth largest economy in 2024-25, with US, China and Japan at first three places. When everyone is working towards the goal, pandemic outbreak hits the growth with lockdown, low business and so on. Data released by the National Statistical Office (NSO) on August 31, 2020 showed a 23.9% contraction of GDP in the first quarter (April-June) of 2020 compared to the same period the previous year. The contraction affected the entire non-farm sector, worst hit on the construction. Agriculture was the only exception with a growth rate of 3.4 percent.
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The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) says the GDP was expected to witness a deceleration of 9.8 percent in the second quarter (July-September), 5.6 percent in the third quarter (October-December) and enter positive territory with a growth of 0.5 percent in the fourth quarter (January-March). The next financial year (2021-22) would begin with a 20.6 percent growth in the first quarter. MPC forecasted that India could see its worst recession ever in 2020-21 with 9.% economy contraction. World Bank in its half-yearly South Asia Focus update released on October 8, 2020 predicted that Indian economy would shrink by 9.6% in 2020-21 because of the pandemic. On the brighter side, the update projected that growth would rebound to 5.4% in 2021-22. International Monetary Fund (IMF) in its biannual World Economic Outlook predicted India’s GDP to contract by 10.3% in 2020-21 and says economy would rebound to an impressive 8.8% growth in 2021-22, regaining its position of the fastest growing emerging economies, surpassing China’s projected growth rate of 8.2 percent. The projections say that the set back to Indian economy is short-lived and that it would rebound soon to pre-covid growth rate.
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