Chapter 5: MEDIUM-TERM OUTLOOK: A GROWTH VISION FOR NEW INDIA

In the medium term, the Indian economy can grow at a rate of 7 per cent plus on a sustained basis if we can build on the structural reforms undertaken over the last decade.

Against this backdrop, the chapter identifies the areas of crucial policy focus as well as presents a six-pronged growth strategy to achieve this goal.

Currently, in 2024, the Indian economy has reached USD 3.6 trillion from USD 300 bn, with a remarkable 12-fold increase in the economy.

India’s per capita current dollar GDP has increased from 301.5 in 1993 to 2,484.8 in 2023, which indicates a substantial improvement in the standard of living.

India has now set for itself the goal of becoming a developed nation within a generation by 2047, the hundredth year of independence.

The medium-term growth outlook for the Indian economy, which will be detailed in this chapter, is premised on the following key tenets:

• First, increasing geoeconomic fragmentation and resource nationalism have significant growth-limiting impacts on countries. It has given rise to a trade-off between efficiency and resilience.
• Second, a global trust deficit drives countries to pursue self-reliance and protectionist policies, requiring a nuanced balance between inward and outward-looking policies.
• Third, climate change strategies should be integrated into national development, adaptation and emission mitigation balanced, and energy security and economic development should be traded off against energy transition.
• Fourth, Technology is emerging as a strategic differentiator, with the potential for productivity growth but also social impacts like labor market disruption, displacement, and income inequality.
• Fifth, countries across the board have limited policy space to manoeuvre, given the multiple crises confronting the global economy. Therefore, recognition and acceptance of trade-offs have become more necessary than before for policymakers.
• Sixth, The Indian government has implemented significant reforms (2014-2024) to Restore economic health, Address supply-side constraints and Strengthen capabilities.

The next stage is to ensure that these reforms, through Intense engagement with state governments, the private sector, and civil society, Focus on bottom-up reform and Strengthen governance “plumbing” to achieve Strong, Sustainable, Balanced, and Inclusive growth.

KEY AREAS OF POLICY FOCUS IN THE SHORT TO MEDIUM-TERM

Generating productive employment:

• India’s workforce is estimated to be nearly 56.5 Crore, of which more than 45 per cent are employed in agriculture, 11.4 per cent in manufacturing, 28.9 per cent in services, and 13.0 per cent in construction.
• Apart from the service sector, which provides major jobs, the construction sector is also rising.
• According to UN population projections, India’s working-age population (15-59 years) will continue to grow until 2044.
• The chapter on Employment (chapter 8) estimates that the Indian economy needs to generate nearly 78.51 lakh jobs annually in the non-farm sector to cater to the rising workforce.

Skill gap challenge

• Sixty-five per cent of India’s fast-growing population is under 35, and many lack the skills needed by a modern economy.
• Estimates show that about 51.25 per cent of the youth is deemed employable. However, the percentage improved from 34 per cent to 51.3 per cent in the last decade.
• The 2022-23 Annual Report of the Ministry of Skill Development & Entrepreneurship (MSDE) highlights that among persons aged 15-59 years, about 2.2 per cent reported to have received formal vocational training and 8.6 per cent reported to have received non-formal vocational training”.

Tapping the full potential of the agriculture sector:

• Despite its centrality in India’s growth trajectory, the agriculture sector continues to face structural issues.
• There is a need to improve price discovery mechanisms for agriculture products, increase efficiency, reduce disguised unemployment, address the fragmentation of landholding, and increase crop diversification, among a host of other issues.

Easing the compliance requirements and financing bottlenecks confronting MSMEs

• Licensing, Inspection, and Compliance requirements that MSMEs have to deal with.
• Many MSMEs struggle to secure the necessary funds to start, operate, or expand their business for various reasons, including lack of collateral or credit history, high interest rates, etc.

Managing India’s green transition:

• India has committed to reducing its greenhouse gas (GHG) emissions by 33-35 per cent (from 2005 levels), increasing the share of non-fossil fuel-based electricity to 40 per cent and enhancing forest cover to absorb 2.5 to 3 billion tonnes of carbon dioxide by 2030.
• Also, India has to deal with climate change and, undertake energy transition and deal with the protectionism of the developed countries.

Apart from the above, there is also a need to focus on the dynamics of India-China economic relations, which continue to be extremely complex and intertwined, tackling inequality and improving the quality of health of India’s young population.

GROWTH STRATEGY FOR AMRIT KAAL: STRONG, SUSTAINABLE AND INCLUSIVE

To sustain growth for nearly a generation up to 2047 or more and to ensure that it makes people’s lives better and fulfils their aspirations, bottom-up reforms are necessary. Here, we will discuss a six-pronged growth strategy that can guide the bottom-up reform process going forward:

• Strategy for boosting private sector investment
• Strategy for the growth and expansion of India’s Mittelstand
• Strategy for removing the growth impediments in the agricultural sector
• Strategy to secure the financing of green transition in India
• Strategy towards bridging the education-employment gap
• Strategy towards building state capacity and capability

OUTLOOK IN THE MEDIUM TERM

The structural reforms undertaken by the government of India over the course of the last decade have put the economy firmly on a growth path, and India is soon set to become the third largest economy in the world, following the US and China.

India has graduated from being a low-income country to a low-middle-income country.

From the given above, the six-pronged growth strategy is premised on the understanding that the structural reforms of the last decade, focused on the supply side of the economy, have to give way to next-gen reforms that are bottom-up in nature to yield strong, sustainable, balanced and inclusive growth.

Building on past structural reforms, such as banking system strengthening and GST implementation and, emphasis is also on collective effort (“Sabka Prayas”) for achieving Viksit Bharat @2047, a vision for India’s progress.