India has to navigate tough situation to achieve $5 trn economy

Visakhapatnam: Indian economy is all set to achieve the $5 trillion GDP mark by 2027-28 if the country posts 9 per cent GDP growth rate each financial year. However, the country faces the daunting task of achieving the milestone such as higher import bill pushing up current account deficit (CAD), high fiscal deficit, inflationary economic environment and disruption to global supply chain, among others.

Addressing the 'Bizz Buzz Business Conclave' in Visakhapatnam, former Chairman & Managing Director of the Indian Overseas Bank, M Narendra said that factors like rising exports and growth of digital economy can support India's ambition to turn into $5 trillion economy.

A two-day business conclave organised by The Hans Group and Bizz Buzz kickstarted today in Visakhapatnam, the City of Destiny.

"Current global economy is facing many challenges like high inflation, rising oil prices amid the Russia-Ukraine war, rate hikes by US Federal Reserve and disruption to global supply chain, among others. The impact of these factors will push India's current account deficit, fiscal deficit, and inflation," said Narendra addressing the event.

Notably, this year's budget has factored in crude oil prices at $70 per barrel while the current oil prices are ruling over $100 per barrel as of now. This has led to high inflation due to rising commodity prices across the world. India, which had forex reserves of covering import bills worth 18 months, has reduced to 12 months due to high import bill.

Meanwhile, US Federal Reserve has started raising interest rates to contain inflation. This, in turn, has led to outflow of funds by FPIs (Foreign Portfolio Investors) from Indian equity and debt markets.

"In this regard, India has to manage the global environment tactfully to support its growth. The central government initiatives like Atmanirbhar Bharat, Production-linked Incentive Scheme, Gati Shakti and many more are the steps in the right direction which will support the growth of Indian economy," he said.

He also said that the governments'- both centre and States- emphasis on the infrastructure sector would help in capital creation and generate employment for the youth.

Another silverlining amid the gloomy global economic environment is the rising exports from India. The country had achieved $420 billion of exports in the last financial year.

"We should promote exports as much as possible which will provide cushion against current account deficit," he said.

Meanwhile, India's aim to create $1 trillion digital economy will supplement efforts of achieving $5 trillion economy. "Indian startup ecosystem is growing very fast with more than 100 unicorns. This puts India at a good spot in terms of promoting its digital economy," Narendra said. India is also attracting foreign direct investment (FDI) at a faster pace which can be one of the redeeming factors for the domestic economy. The country has attracted around $81 billion worth of FDI in the last financial year.