K V Kamath, the chairman of the National Bank for Financing Infrastructure and Development (NaBFID), has expressed his belief that the digital sector will contribute a significant proportion of India’s GDP by the time the economy becomes a $7 trillion giant by FY29. At present, the digital economy contributes only 4% to India’s GDP, whereas in China, it makes up as much as 40%. Kamath is convinced that the digital sector, encompassing the digital infrastructure, e-commerce, and other digital payments and services segments, has great potential to become a major factor in India’s economic growth in the future. He estimates that these segments will bring about 25% of India’s extra GDP when it reaches its $7 trillion target.
Speaking to PTI, Kamath highlighted the importance of investing in infrastructure to support this growth, including expressways, highways, airports, seaports, and high-speed railway networks. He argued that there is still a lot to do in these key infrastructure sectors, and there is a significant appetite for further investment. He also called for more urban rejuvenation projects, not limited to top cities alone, to build more world-class cities and upgrade existing ones.
With the aim of becoming the third-largest economy in the world, India’s government is targeting a GDP of $7 trillion by FY29, which would surpass Japan’s current GDP of $3.3 trillion. According to Kamath, the current transportation infrastructure of the country will not be sufficient to match the needs of an economy that is projected to double in size in five years. Therefore, construction of more expressways, airports, and seaports is necessary.
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Kamath also addressed concerns over the potential for another banking crisis due to excessive debt-driven expansion by infrastructure companies, which led to a collapse in asset quality for banks during the last decade. However, he does not believe that this will be repeated, as he sees the current level of debt-driven expansion as more sustainable.
In summary, Kamath’s belief in the potential of the digital sector to drive India’s growth is based on the contribution it can make to GDP. He argues that investments in infrastructure, such as expressways, highways, airports, and seaports, will be essential to supporting this growth, alongside urban rejuvenation projects to create more world-class cities. Kamath is optimistic about the future of India’s economy, with expectations of becoming the third-largest in the world by FY29, and believes that the risks of another banking crisis are low due to more sustainable levels of debt-driven expansion.
