What will a 10% growth in the GDP every year in India do?
At present over all growth rate of India varies between 7-8%, in agriculture it is 2-3% and industry 5-6%. It means the service sector grows at more than 10% per annum.
Growth in agriculture is possible if there is improved irrigation and use of high yielding seeds leading to more production. The farmers should also be properly trained by modern skills. It is a time taking proposition in India as in any other country.
Industrial output will increase if more investment in plant and machineries are made. Traditional Indian industries are tea, sugar,textiles, steel, coal and minerals. New areas are Power and Telecommunications.
Growth here will depend on additional investment, export prospect, stability of Indian Rupee and domestic inflation. So increasing industrial production upto 10% per annum will be herculean if not impossible task.
Thus the last area of growth is service sector where it is already 10%. If we project agriculture growth at 4% and industrial growth at 8% per annum in the next 5 years, service sector has to grow at a very high 18% to achieve 10% average growth in overall GDP.
So massive investment in infrastructure, software, banking and insurance will be required for such growth. It is no doubt a difficult proposition.
However, increasing infrastructure like railways and road communication will increase trade and commerce. Besides export will also increase, for which agriculture and industrial production have to grow.
In the recent past China achieved sustained growth of 10% and above, which was due to massive increase in infrastruture and export of Chinese goods. To increase Chinese exports they devalued their currency as a result Chinese imports became costly. The foreign exporters failed to make payment for Chinese goods due to declining Chinese imports.
China also felt the heat when it failed to pay back to foreign exporters in dollar, which became costly relative to Chinese Yuan. There was world wide payment crisis as China is the largest exporter and second largest importer in the world. Thus export led growth is not an unmixed blessing.
It is a truism that simply because there will be 10% growth in GDP, there will be massive employment and removal of poverty. It may also lead to concentration of wealth in a few hands if adequate safeguards are not provided by the Govt.
To conclude 10% GDP target will be a long term objective and a moderate average growth rate of 8% in all the three sectors will increase the overall size of the economy based on social justice and creation of adequate employment opportunities in different sectors.
As half of India’s population depend on agriculture, there is urgent need for growth of this sector along with industry and service sectors. India is a fertile land rich in water and maritime resources unlike many other bigger countries of the world which are barren, cold or grass land.
Source: Quora. Date: 13 July, 2016