India to be Third Largest Economy By 2028

India to be Third Largest Economy By 2028

Mains Exam: General Studies Paper 3

(Indian Economy)

July 11, 2023

In News:

  • According to a recent report by the International Monetary Fund, India is on track to become the world's third largest economy by 2028.
  • Recently, while addressing the joint session of the US Parliament, the Prime Minister said that by 2028 India will become the third largest economy in the world.

What does the IMF report say?

  • According to this report, by the year 2028, the size of the Indian economy will be equal to US $ 5.58 trillion and at that time India will be at the third position in the world. Japan will be at number four with USD 5.34 trillion and Germany at number five with USD 5.04 trillion.
  • But in this context it is also worth mentioning that during that time the size of China's economy will be 27.49 trillion dollars and the size of America's economy will be equal to 32.35 trillion dollars. That is, China will be more than five times bigger than India, while America will be more than six times.

Current Global Economic Situation:

  • According to the International Monetary Fund's December 31, 2022 report, the size of the GDP of all the world's economies at present has crossed US$ 1 trillion, which was equivalent to US$ 3.4 trillion in the year 2000.
  • In the last three years, the size of the Indian economy has increased by only US$ 0.55 trillion (from 2.84 to 3.39), while the GDP size of China and US economy has increased by US$ 3.76 trillion and US$ 4.08 trillion respectively.
  • In the last 22 years, the size of the GDP of all the world's economies has increased three times and in all this, America has maintained its share in the GDP of all the world's economies in the first position, more than one-third. China has also made unprecedented economic growth in the last 15-20 years and due to this the GDP of all major economies of the world has tripled.

Obstacles in the way of Becoming the Third Largest Economy:

  • India being the most populous country in the world.
  • Very low per capita income relative to the size of GDP at the household level.
  • India's dependence on America and China in terms of imports
  • India being far behind in comparison to other countries in terms of exports.
  • India's trade deficit with China is about 100 billion dollars.
  • India's imports with China are more than exports.
  • Significant weakening of the Indian Rupee against the US Dollar in the last four years.
  • Lack of resources to deal with unemployment and inflation at the domestic level.
  • Unprecedented disruption of economic development due to the economic side effects on the economy for about one and a half years due to the corona pandemic.

Major contributory factors in Becoming the third largest Economy:

  • Better Economic Development Policies: In the last thirty years, India has consistently maintained a good economic growth rate by making radical changes in its economic development policies.
  • Economic Reforms: The size of the Indian economy was just US$ 0.3 trillion in 1991, which grew to US$ 0.52 trillion by 2004.
  • Growth in GDP: Facing the 2007 US recession, global crisis and economic sanctions, India increased its GDP size to US$ 1.86 trillion from 2003-04 to 2013-14.
  • From the year 2013-14 to 2022, the Indian economy has achieved a milestone of US $ 3.39 trillion and India has become the fifth largest economy in the world.
  • India to become third largest economy by 2028 confirmed by IMF report
  • By the current year 2023 by the IMF, the size of India's economy is estimated at $ 3.75 trillion.

Reasons for India's backwardness from economic point of view:

  • The pace of the Indian economy in the last few years has been relatively low due to the following reasons:
  • The Indian Rupee has depreciated significantly against the US Dollar in the last four years. During this period, the Indian rupee has fallen by 20 percent against the dollar, while China's currency Yuan has not seen such a decline against the US dollar. The result of this is that China's GDP has grown rapidly in the last years. It is also clear that due to the weakening of the rupee, where the import bill became costlier and the inflation in the domestic market continued to rise, which affected the economic growth.

Conclusions:

  • In the last three decades, India's economic development has been of a high level, due to which India will surely become the world's third largest economic power in the coming years.
  • In the race to become the third largest economic superpower, India needs to be economically strong enough to compete with China and the US, which are also achieving rapid economic growth.

                                                      ----------------------------

Mains Exam Question

By 2028, the Indian economy is on track to become the third largest economy in the world. Present your comparative point of view in this context.