Introduction: The Government of India, under the Ministry of Finance and the Department of Economic Affairs, is actively pursuing an ambitious action plan to position the country as the third-largest economy by the year 2027. In response to an unstarred question in the Rajya Sabha (Unstarred Question No. 1813) on December 19, 2023, Minister of State for Finance, Shri Pankaj Chaudhary, provided valuable insights into the government’s strategies and initiatives.
Detailed Analysis: Answering the first query (a), Minister Pankaj Chaudhary highlighted that, according to the International Monetary Fund (IMF) World Economic Outlook (WEO) projections in October 2023, India is anticipated to become the third-largest economy in 2027-28, reaching a GDP of USD 5 trillion. These projections consider the impact of both domestic and global market factors, taking into account the effectiveness of government measures.
Addressing the second query (b), the Minister outlined a series of effective measures undertaken by the government over the past decade. These measures span various sectors, including significant reforms in the taxation ecosystem. Reforms such as the restructuring of corporate tax rates, reduction in tax litigation, and the successful implementation of Goods and Services Tax (GST) have contributed to substantial revenue growth and reduced compliance burdens.
Furthermore, the government has increased capital expenditure (capex) from ₹4.1 lakh crore in 2020-21 to ₹10 lakh crore in 2023-24 (BE), supporting crucial growth. The initiation of the PM Gatishakti Scheme for infrastructure and logistics has facilitated private sector investment. The focus on developing public digital infrastructure has enhanced financial inclusion, formalization of the economy, efficient service delivery, and transparent governance processes.
Flagship programs like Make in India and Start-up India aim to boost the manufacturing sector. The Production Linked Incentive (PLI) Scheme, extended to 14 sub-sectors, and enhanced support to MSMEs contribute to manufacturing growth. Reforms in regulations, strategic sector opening for private players, dedicated policies for central public sector enterprise privatization, and labor law rationalization have further supported manufacturing sector growth.
The financial sector has seen strengthening through measures like the implementation of the Insolvency and Bankruptcy Code (IBC), bank recapitalization, and mergers. These actions have equipped corporate and banking sectors with strong balance sheets for increased investment. Corporate tax rate reduction, liberalization of Foreign Direct Investment (FDI), and other reforms contribute to a positive medium-term economic outlook, aligning with India’s development goals.
Conclusion: In conclusion, the comprehensive action plan outlined by the Government of India, Ministry of Finance, and the Department of Economic Affairs reflects a determined effort to propel the nation into the ranks of the world’s third-largest economies by 2027. The multifaceted approach, spanning taxation, infrastructure, digitalization, and sector-specific reforms, positions India for sustained and inclusive economic growth. The outlined measures not only enhance the business climate but also create a conducive environment for domestic and international investments, paving the way for India’s economic aspirations to materialize.
*****
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF ECONOMIC AFFAIRS
RAJYA SABHA
UNSTARRED QUESTION No. 1813
ANSWERED ON 19 DECEMBER 2023
ACTION PLAN TO MAKE THE COUNTRY THIRD LARGEST ECONOMY
1813. SHRI RAM SHAKAL:
Will the Minister of FINANCE be pleased to state:
(a) whether Government has prepared an action plan to make the country the third largest economy by the year 2027; and
(b) if so, the details thereof?
ANSWER
MINISTER OF STATE FOR FINANCE (SHRI PANKAJ CHAUDHARY)
(a) : As per the International Monetary Fund (IMF), World Economic Outlook (WEO), October 2023 projections, India is projected to become the third largest economy in 2027-28 with a GDP of USD 5 trillion economy. The impact of domestic and global market economy and effective government measures have been considered in making the projections.
(b) : Towards becoming the third largest economy and beyond, the government has undertaken a series of effective measures over the last decade for enhancing the economic opportunities and strengthening the growth prospects in the country. These measures span several sectors of the economy. The taxation ecosystem in the country has undergone substantial reforms in the past nine years in both direct and indirect Direct tax measures such as the restructuring of the corporate tax rates, reduced tax litigation and removal of tax uncertainties have considerably reduced the compliance burden and resulted in high growth of revenues. Indirect tax measures include successful implementation of Goods and Services Tax (GST), which has realised the goal of One Nation, One Tax, One Market, expanded the formal sector in the economy and ensured a high collection of GST revenues. There has been a large expansion of government’s capital expenditure (capex) without weakening fiscal discipline. Government’s capex has increased from ₹4.1 lakh crore in 2020-21 to ₹10 lakh crore in 2023-24 (BE), crucially supporting growth. It has also initiated the crowding-in of private sector investment further assisted by PM Gatishakti Scheme on infrastructure and logistics. The Government’s capital expenditure has been directed towards infrastructure intensive sectors, thus, improving the connectivity in the country.
Besides the push to physical infrastructure, the government’s emphasis on developing public digital infrastructure during the last few years has been a game changer in enhancing the economic potential of individuals and businesses. The digital infrastructure has, inter alia, led to enhanced financial inclusion, formalisation of economy, efficient service delivery and transparent governance processes.
The above measures have significantly improved the business climate and are encouraging investments across different sectors. Flagship programmes of the Government such as the Make in India and Start-up India have been put in place to boost the manufacturing sector. The Production Linked Incentive (PLI) Scheme, now extended to 14 sub-sectors, has also contributed to manufacturing growth. Further, support to MSMEs has also been enhanced to not only broad base the manufacturing sector but also increase inclusivity in the growth process. Progressive easing of doing business through simplification of regulations, opening the strategic sectors for the private players, adopting a dedicated policy towards privatisation of the Central Public Sector Enterprises and rationalisation of labour laws have also been supporting the growth of the manufacturing sector.
The financial sector has also been strengthened in the past years to support the growth of businesses in the economy. Measures ranging from implementation of the Insolvency and Bankruptcy Code (IBC) to recapitalisation and merger of banks have enabled the corporate and the banking sector to have strong balance sheets to leverage funds for higher investment, necessary for increasing India’s economic growth. The reduction in corporate tax rate to one of the lowest in the world has increased corporates reserves and provided additional funds for investment. Liberalisation of Foreign Direct Investment (FDI) has resulted in large inflows further providing financing for investment. All these reforms strengthen the medium-term economic outlook for the country will enable India to achieve its development goals.
****
