To achieve a five trillion-dollar economy, a concerted effort is needed to boost both private and public investments. Here are key measures:
- Tax-GDP Ratio Enhancement:
- Increase India’s tax-GDP ratio to at least 22% of GDP by 2022-23.
- Sustain efforts to rationalize corporate and personal income taxes.
- Use technology to ease tax compliance and eliminate direct interfaces between taxpayers and officials.
- Demonetization and the Goods and Services Tax (GST) contribute positively to tax revenue efforts.
- State Revenue Mobilization:
- States should mobilize their taxes like property tax and enhance GST administration to boost tax collections.
- Savings Rate Increase:
- Raise India’s savings rate from the current sub-30% to about 40% of GDP.
- Public Investment Focus:
- Direct higher public investment into housing and infrastructure.
- Housing investment, especially in urban areas, creates substantial multiplier effects, generating demand, employment, and credit.
- Infrastructure investment in roads, inland waterways, ports, airports, irrigation, and digital connectivity addresses longstanding deficiencies.
- Foreign Direct Investment (FDI) Attraction:
- Further, liberalize FDI norms across sectors to attract more foreign investment.
- Complement domestic savings by attracting foreign investment in bonds and government securities.
- Relax regulatory limits for rupee-denominated debt.
- Strategic Exit from CPSEs:
- Continue to exit non-strategic Central Public Sector Enterprises (CPSEs).
- Inefficient CPSEs surviving on government support distort sectors; their exit attracts private investment and contributes to the exchequer.
- Private Investment in Infrastructure:
- Encourage private investment in infrastructure through renewed Public-Private Partnership (PPP) mechanisms, following recommendations from committees like the Kelkar Committee.
These measures collectively aim to create an environment conducive to higher investments, both domestic and foreign, fostering economic growth and steering India towards the ambitious goal of a five trillion-dollar economy.
FAQs
Q1: What is investment-led growth?
A1: Investment-led growth refers to an economic strategy where the primary driver of economic expansion is increased investment in productive assets such as infrastructure, technology, education, and innovation.
Q2: Why is investment-led growth crucial for achieving a Five Trillion Dollar Economy?
A2: Investment-led growth is vital because it creates a multiplier effect on economic activity, leading to increased productivity, job creation, and higher incomes. This, in turn, propels the economy towards the ambitious goal of reaching five trillion dollars.
Q3: What are the key sectors that require investment for driving growth towards a Five Trillion Dollar Economy?
A3: Key sectors requiring investment include infrastructure (transportation, energy, telecommunications), manufacturing, healthcare, education, agriculture, and technology. Strategic investment in these sectors can stimulate growth across the economy.
Q4: How can the government encourage investment-led growth?
A4: The government can encourage investment-led growth through policies that provide incentives for private sector investment, streamline regulatory processes, ensure political stability, offer tax breaks, invest in human capital development, and foster a conducive business environment.
Q5: What are the potential challenges in achieving investment-led growth for a Five Trillion Dollar Economy?
A5: Challenges may include attracting sufficient investment capital, addressing infrastructure bottlenecks, ensuring policy consistency, mitigating regulatory hurdles, managing inflationary pressures, and fostering inclusive growth to mitigate socioeconomic disparities. Overcoming these challenges requires coordinated efforts from both the public and private sectors.
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