New Delhi: India has set itself an ambitious task of clocking an overall gross domestic product (GDP) of 5 trillion dollars by 2025. In order to cross the mark, a working group constituted by the Department of Industrial Policy and Promotion with participation from government and industry, has zeroed in on financial literacy and non-performing assets (NPAs) as the cornerstones for this goal.
Sources in the ministry informed that accelerated efforts are required from the government and the public stakeholders to intensify financial inclusion and equally financial literacy to fuel India towards achieving this target as other tools of reforms are almost complete on policy front.
The report submitted to all stake-holders talks about the immediate need to clean up the mess on the NPAs front through Insolvency and Bankruptcy code (IBC) and National Company Law Tribunal (NCLT) route, the positive results of which would be exponential.
Earlier, department of economic affairs’ additional secretary CS Mohapatra had said, “The government has tried its best and already put in necessary policy measures to bring about financial stability in the institutional mechanism of the country which would make way to achieving desired objective.”
Meanwhile, the NPAs of India's public sector banks more than tripled between June 30, 2014 and the end of December 2017, the Reserve Bank of India said in response to an RTI in September, 2018.
The RBI says that on June 30, 2014, the gross NPAs of these banks were worth Rs 2,24,542 crore. At the end of December last year, that number had risen to Rs 7,23,513 crore. These numbers were reported by the banks to the RBI.
The task becomes all the more daunting as India currently sits on a GDP of roughly 2.6 trillion dollar with an average growth rate of 6.5 percent. Moreover, financial literacy has always been a roadblock for India.
As per a global survey by Standard & Poor’s Financial Services LLC (S&P) less than 25 percent of adults are financially literate in South Asian countries. For an average Indian, financial literacy is yet to become a priority. India is home to 17.5 percent of the world’s population but nearly 76 percent of its adult population does not understand even the basic financial concepts.
Apart from the avenues that need attention, the report has also identified areas that will foster growth. “The underlying strengths are indicative of the potential of India to achieve a 5 trillion dollar economy by 2025. The current structure of the economy and the emerging dynamics provide us grounds to target achieving one trillion dollar from agriculture and allied activities, one trillion from manufacturing and three trillion from services,'' excerpts from the report read.
The group had held extensive and broad-based consultations with stakeholders to better understand the aspirations and the potential. The sectoral sub-groups were also formed to take the task forward. India is currently ranked as the world’s sixth largest economy.
Among the positives mentioned in the report are the government’s aim to reorient policy focus from being production-centric to becoming income-centric. The proposed Industrial Policy 2018 provides an overarching, sector-agnostic agenda for the enterprises of the future and envisions creating a globally competitive Indian industry that is modern, sustainable and inclusive.
The Champion Services sector initiative is also underway to accelerate the expansion of select service sectors. The Working Group has accounted for these initiatives and encourages a fresh impetus to achieve the target of a five trillion economy.