While presenting the interim budget for the fiscal 2014-15 in the Lok Sabha, the finance minister said the size of Indian economy is the 11th largest in the world.
“I wonder how many have noted the fact that India’s economy, in terms of the size of its GDP, is the 11th largest in the world. There are great things in store,” he said.
“There is a well-argued view that in the next three decades India’s nominal GDP will take the country to the third rank after the US and China,” the finance minister said.
“Just as the fortunes of the developed countries affect the emerging economies today, the fortunes of China and India will, in the future, have a significant impact on the rest of the world. We, therefore, owe a responsibility not only to ourselves but to the whole world to keep our economy in robust health,” he added.
He listed 10 tasks that the government need to focus on to achieve the target of making the economy third largest.
– Fiscal Consolidation: A target of fiscal deficit of 3 percent of GDP must be achieved by 2016-17 and must always be kept below that level.
– Current Account Deficit: Since the economy will run a Current Account Deficit every year for some more years, it can be financed only by foreign investment, whether it is FDI (foreign direct investment), or FII (foreign institutional investment), or ECB (external commercial borrowings) or any other kind of foreign inflow. Therefore, foreign investment must be encouraged.
– Price Stability and Growth: In a developing economy where the aim is high growth, a moderate level of inflation will have to be accepted. The RBI must strike a balance between price stability and growth while formulating monetary policy.
– Financial Sector Reforms: The recommendations of the Financial Sector Legislative Reforms Commission must be implemented immediately as they do not require any change in legislation. Also, a timetable must be drawn for other recommendations that require legislation.
– Infrastructure: The country must rebuild its infrastructure and add a huge quantity of new infrastructure. Every proven model must be adopted but the PPP model must be more widely used. New financing structures must be created for long term funds and pooling of investments.
– Manufacturing: The government must focus on manufacturing and especially on manufacturing for export. The minister proposed that all taxes, central and of states, that go into an exported product should be waived or rebated. He also proposed that there should be a minimum tariff protection so that there is an incentive to manufacture goods in India rather than import them into India.
– Subsidies: Given the limited resources, and the many claims on the resources, the government must choose the subsidies that are absolutely necessary and give them only to the absolutely deserving.
– Urbanisation: The country’s cities will become ungovernable, and perhaps unliveable, if attention is not paid to the decay in these cities. Cities have wealth and also create wealth. But that wealth should be tapped for resources to rebuild the cities with a new model of governance.
– Skill Development: Skill development must rank alongside secondary education, university education, total sanitation and universal health care in the priorities of the government.
– Sharing responsibility between states and the centre: States have the fiscal space to bear a reasonable proportion of the financial costs of implementing flagship programmes and must willingly do so, so that the central government can allocate more resources for subjects such as defence, railways, national highways and telecommunications that are its exclusive responsibility.