The minister said that India has been a consumption-led economy in the past and the Prime Minister has taken a "path of faith" to increase capital investment despite reluctance from several economists
Indian economy can grow consistently at 8 per cent for the next 20 years leading to the generation of up to 1.5 crore new jobs and bringing out 3.5 crore people out of the poverty every year on the basis of the capital investment strategy of the government, Union minister Ashwini Vaishnaw said on Saturday.
While addressing the annual general meeting of Assocham, he said that the government has set a target of increasing the capital investment level in the budget from 27 per cent of the GDP to 35 per cent of the GDP over the next few years.
"We follow the strategy of capital investment for 5-6 years more, we can grow at 8 per cent consistently for the next 20 years. 8 per cent growth in the next 20 years means, every year close to 1-1.5 crore new employment, 30-35 million people coming out of poverty. That's the change we can bring in our society by that thought process," Vaishnaw said.
The minister said that India has been a consumption-led economy in the past and the Prime Minister has taken a "path of faith" to increase capital investment despite reluctance from several economists.
"Many of the European countries followed the prescription of the noble laureates and they are in a very bad situation. We decided to choose the path which had three elements- public investment, very focussed consumption and reforms and incentives for private industries," Vaishnaw said.
He said Germany, the US, Japan, China and South Korea have followed the same path of capital investments for several years.
The minister said the country's nominal GDP at the end of the financial year 2021 was Rs 198 trillion and the target was to reach Rs 225 trillion.
In this Rs 198 trillion economy, close to Rs 116 trillion came from consumption which is about 59 per cent of the GDP and Rs 53 trillion came from investment which is only about 27 per cent of the GDP, the minister said. The government after analysing that its liability is around 60 per cent of the GDP, decided to go for increasing capital investments.
Vaishnaw said that the Centre gets roughly Rs 20 trillion as gross tax revenue and net tax revenue, after taking out state government share, is about Rs 15 trillion and non-tax is about Rs 3 trillion.
"About Rs 18 trillion is the total receipt that the government of India gets on the revenue side," he said.
The minister said that the government in the last year's budget made a capital investment of Rs 5.5 trillion.
He said that the GDP target surpassed the Rs 225 trillion target and reached Rs 232 trillion.
The minister said that the result of Rs 5.5 trillion is now visible and based on the result the government has decided to increase the capital investment to Rs 7.5 trillion.
"This will add Rs 22.5 trillion to the Indian economy," Vaishnaw said.
He said that the way our economy is structured Rs 13 trillion will go to the MSME sector and close to Rs 10 trillion will go as wages and salaries which lead to people spending in several sectors.
The minister said that people who are in the brick and mortar industry may have seen that the factory capacity utilisation was around 60-70 per cent a year ago which has now reached about 80-85 (per cent) and in some sectors it has reached 90-95 per cent where people are now planning setting up new facilities.