Prime Minister Narendra Modi's declaration that India is on track to become the world's third-largest economy by 2027 has sparked discussions about the country's economic path.
This ambitious vision aligns closely with India's overarching objective of reaching a $5 trillion economy by 2025, a target endorsed by economists and international organizations alike.
V Avantha Nageswaran, Chief Economic Advisor, projected India's potential to grow at a rate of 6.5-7 percent, aiming to achieve a $5 trillion economy by 2025-26, with aspirations of reaching $7 trillion by 2030, subject to exchange rate fluctuations.
However, achieving such growth requires significant expansion across key sectors and substantial job creation.
A recent McKinsey report emphasized India's urgent need to generate at least 90 million non-farm jobs by 2030 to sustain productive employment growth.
To realize this, India's GDP must grow annually by 8.0 to 8.5 percent, a considerable leap from the 4.2 percent growth rate witnessed in fiscal year 2020. Amid the uncertainties posed by the COVID-19 pandemic, projections are focused on scenarios beginning in fiscal year 2023.
The World Bank's spring 2023 India development update report highlighted India's resilience amidst global economic challenges.
The financial sector exhibits strength, with healthier balance sheets and recovering credit growth, instilling confidence in India's economic outlook.
To bridge the gap between the current growth rate and the targeted 8 percent annual growth, India must prioritize five key areas:
1.More quality employment opportunities with respectable wages and incomes, particularly focusing on women and youth.
2. Emphasize the elimination of human capital deficits and ensure sufficient credit for enterprises post-skill acquisition.
3. Implement decentralized governance for improved outcomes in public sectors such as education, health, nutrition, clean air, and infrastructure, alongside effective dispute settlement mechanisms.
4. Review public subsidies in sectors like fertilizers and food, including the minimum support price system. Evaluate performance-linked incentives for manufacturing to allocate resources more efficiently towards enhancing human capital and fostering higher productivity.
5. Enhance the ease of doing business in practice, instilling confidence in the private sector to drive investments on a larger scale and stimulate economic growth.
Enhancing wage rates, particularly in public works, is central to India's growth agenda, fostering dignified livelihoods and skill development. Success stories from states like Kerala and Himachal Pradesh highlight the importance of prioritizing minimum wages for all.
Despite challenges, India's growth indicators remain robust. The World Bank's revised GDP growth projections of 7.5 percent for 2024, coupled with significant poverty reduction efforts, position India as the fastest-growing economy in South Asia.
However, realizing this vision requires concerted efforts across various fronts.
From creating quality employment opportunities and investing in human capital to ensuring decentralized governance and revisiting public subsidies, India must address key challenges to sustain robust economic growth.
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