Key priorities for transformation: Increasing investment, creating enabling conditions for more and better jobs, promoting structural transformation, trade participation and technology adoption, enabling states to grow faster and together
Chennai: India will have to grow by 7.8 per cent on average over the next 22 years, above its historical average of 6.7 per cent to achieve high-income status. This could be achieved by promoting structural transformation, trade, and technology infusion to improve productivity, reviving and sustaining investment, creating more and better jobs and facilitating states to grow together, finds the World Bank.
Among the 13 economies that sustained high growth over more than 30 years, only six, including Hong Kong, China, Japan, Korea, Malta, Singapore and Taiwan, managed to sustain high growth all the way into high-income levels. India became a Low Middle- Income Country in 2009 and continues to grow at a rapid pace. However, to reach the High-Income Country status by 2047, India would need to grow above its historical average of 6.7 per cent for the next two decades.
More private and public investment from around 33.5 per cent of GDP to 40 per cent by 2035 will be fundamental to long-term growth. Strengthening financial sector regulations, removing constraints to formal credit for micro, small, and medium enterprises (MSMEs), and simplifying foreign direct investment (FDI) policies will be critical.
India’s overall labour force participation remains low by middle-income countries standards Over the next three decades, the growth of the working-age population will decelerate and there will be a limited window to maximize demographic gains by boosting labour force participation and job creation. Hence, incentivizing the private sector to invest in job-rich sectors is necessary. Boosting women’s participation in paid activities requires better access to child and elderly care, skilling, formal credit and infrastructure.
Strengthening infrastructure, adopting modern technology, streamlining labour market regulations and lowering the compliance burden on firms will further drive productivity and competitiveness. These steps will help India catch up to peers like Thailand, Vietnam and China in Global Value Chain (GVC) participation rates.
A differentiated policy approach whereby less developed states could focus on strengthening the fundamentals of growth like health, education, and infrastructure, while more developed states could prioritize the next generation of reforms like better business environment, deeper participation in GVCs should be adopted.
It should also ramp-up participation in GVCs by adopting a “whole of the supply chain” approach and greater collaboration with its trading partners. This approach would require sustained investments in infrastructure, negotiating deeper trade agreements, and creating GVC ‘hubs’ in areas of strengths such as IT, pharmaceuticals, and automotive.
