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April 19, 2023 | 5 minute read
India has set its sights on achieving a remarkable milestone – becoming a $5 trillion economy by 2025. This ambitious goal reflects the nation’s determination to harness its immense potential and elevate its economic stature. However, the journey to this landmark achievement is much more than the numerical target; it entails strategic planning, holistic reforms, and innovative approaches.
With modest beginnings in the early 1950s, India’s GDP has grown rapidly, averaging around 7% per annum over the past two decades. In 1991, India began liberalizing its economy and opening up to foreign investment and trade. This led to a market-oriented economy and accelerated economic growth, particularly in the IT and services sectors. Economic reforms and increased foreign investment further fuelled growth, with services, manufacturing, and technology driving the economy. In 2020, India’s GDP stood at $2.9 trillion, making it the world’s fifth largest economy in terms of nominal GDP, showcasing its resilience despite global economic slowdowns, and the supreme challenges of the COVID-19 pandemic. Our GDP currently stands at $3.75 trillion and appears to be right on track.
India’s geopolitical position and relationships with other nations will continue to play a pivotal role in its economic trajectory, including trade agreements, foreign investments, and geopolitical stability.
India continues to implement economic reforms aimed at improving the business environment, attracting investments, and boosting manufacturing through initiatives like “Make in India” & “Start-up India”. Efforts are being made to simplify regulations, enhance ease of doing business, and encourage entrepreneurship.
Other key areas are improving infrastructure, expanding digital networks, and streamlining business regulations to attract investments and in turn contribute to India’s economic goals and global prominence. A holistic approach that addresses infrastructure, business ease, domestic manufacturing, and self-reliance is being strategically put in place.
Embracing digital transformation is a critical step for any nation’s economic growth and development. Digital transformation holds the potential to drive innovation, improve efficiency, enhance citizen services, and create new opportunities across various sectors. Developing a robust data centre infrastructure to support the storage and processing of vast amounts of digital data is vital and is looked into with renewed focus. Promoting digital payment systems to increase financial inclusion and encouraging fintech start-ups to improve access to banking, lending, insurance, and investment services with supportive policies is the next big step to India’s financial prosperity. The growth of UPI payments which stands around 14 trillion INR presently. The number of Digital transactions stands around 10 billion/ month (90% of which is attributed to UPI). Such volumes and numbers show how our nation is becoming more financially inclusive.
The banking ecosystem plays a pivotal role in shaping a nation’s economy and driving economic growth. In the context of India, a robust and efficient banking ecosystem is essential for channelling funds, facilitating investments, promoting financial inclusion, and supporting various economic activities.
The government’s push towards financial inclusion and its flagship programs such as Jan Dhan Yojana, Pradhan Mantri Mudra Yojana, and Stand-Up India have enabled millions of Indians to access formal banking services.
As India continues its journey towards becoming a global economic powerhouse, Digital Financial Services backed by a resilient banking ecosystem to enhance convenience, promote cashless transactions, and contribute to the digital economy remain critical.
While India’s journey towards economic growth and development is promising, there are several roadblocks and potential impediments that could hinder the achievement of its goals. Infrastructure deficits can impede industrial growth and hinder efficient trade and commerce. Limited access to credit and financial services, global geopolitical tensions impacting trade relationships, regulatory challenges and global economic uncertainties can affect India’s export-driven growth. Additionally, the COVID-19 pandemic has had a significant impact on the economy, with the country experiencing a contraction of 7.7% in 2020-21.
Addressing these roadblocks requires a comprehensive and coordinated approach involving policy reforms, investments in human capital and infrastructure, social safety nets, effective governance, and sustainable development strategies.
Empowering the unbanked population with affordable and accessible financial services is not only a social imperative but also a crucial driver of economic growth and development. The access to formal financial services, enhances ability to save, invest, and participate in economic activities. Financial inclusion enables participation in digital payment systems and e-commerce, facilitating trade. Advancements in microfinance and SME lending are crucial for economic development, poverty reduction, and inclusive finance.
Digitizing government processes and services to improve transparency, reduce inefficiencies, and enhance service delivery to citizens and businesses is progressing steadily.
The “Rise of Intelligent India” through investments in advanced technologies like Industry 4.0, Artificial Intelligence (AI), Blockchain, and more is a transformative vision that holds immense potential for accelerating economic growth. India continues to promote sustainable development by investing in renewable energy and promoting green technologies.
With the right policies and initiatives in place to streamline regulations, enhance investor protection, and promote innovative financial instruments, India’s path to a $5 trillion economy and beyond is well within reach.
Senior tech lead,