About 10 years ago, India was seen as one of the ‘Fragile Five’ economies, with shaky macroeconomic fundamentals. Confidence in the economy was plummeting, and inflation spiralling. Even though the economy had been liberalised in the ’90s, a web of regulations still existed, making India one of the toughest places to do business in. Over the past decade, we have seen all this change. India is now a ‘bright spot’ in the global economy, recording 8.2 per cent growth in FY24.
However, to become an economic superpower, we must sustain this growth rate for the coming decades. Only then will our per capita incomes increase from $2,100 to $18,000+ in three decades’ time, making us a high-income country. If we do not sustain these rates, we risk being stuck in a middle-income trap. Investment rates will need to rise, along with domestic savings. Being a function of income, domestic income and savings will only rise with broad-based employment growth.
Improving social outcomes to harness demographic dividend: India, with its demographic dividend and burgeoning workforce with an average age of 29 years, is home to one of the world’s youngest workforce. However, we must improve our social outcomes to realise this dividend. Improving learning outcomes, especially at foundational levels, is critical. Improving employability of graduates from technical and vocational education is another crucial step. Aligning curricula with industry needs, along with well-designed internship and apprenticeship programmes, can help improve employability. Building on Ayushman Bharat, we must now target the ‘missing middle’ in India’s health insurance. Primary healthcare must be strengthened to improve health outcomes. All these efforts, in turn, will hinge critically on nutrition.
Leveraging technology: Going ahead, digital technologies that are sector-agnostic will drive competitiveness. Emerging technologies such as AI, IoT, space, 6G and quantum computing, among others, have opened avenues to disrupt sectors such as agriculture, energy transition, defence, manufacturing, healthcare, life sciences and the digital economy. India is also making strides in geospatial technology, defence and drone technology. With digital public infrastructure providing a strong backbone, we are well poised to capitalise on these technologies. However, R&D expenditure must increase, both from the public and private sector. Globally, most R&D is done by the private sector, with the government playing an enabling role. To spur R&D by the private sector, the government announced a Rs 1 lakh crore R&D fund, aiming to catalyse private investment and drive India’s leadership in emerging tech. As technology gives rise to new business models, regulators need to move in sync. A pro-innovation approach to regulation will drive innovation and growth.
Energy transition: India cannot grow as countries have in the past by exploiting the environment. Our growth model must have sustainability at its core. The energy transition presents an opportunity for India to become energy-independent and, eventually, an exporter. Reaching our 2030 and net zero targets require a tripling of our current effort in renewable capacity addition. Besides expanding solar energy, we must also target harnessing our wind energy potential. Along with renewables, green hydrogen and energy storage, such as batteries and pumped storage, will be crucial in industrial and transport decarbonisation. As in petrochemicals, India must aim at emerging as a mineral processing hub. The G20 Mineral Security Partnership (MSP) can be leveraged to establish raw material supply. Energy efficiency can contribute significantly to energy transition. Currently, India’s energy efficiency norms are lower than those in other countries. As in the case of BS VI fuel, we must target leapfrogging in these norms.
Urbanisation: Growth is driven by cities and urban agglomerations. India’s urban population is expected to rise to the tune of hundreds of millions in the coming decades. Through metros, we are building for the future. However, we need to upgrade our city infrastructure, in terms of waste management, traffic management, climate adaptation and resilience and affordable housing, among other things. Our cities are among the most polluted in the world, and without their clean-up, we will not become an economic superpower. We must reform the governance of our cities.
Export orientation: Central government investments in infrastructure have risen to 3.4 per cent of GDP from a decade back and are lowering the cost of logistics. The focus must now shift to other cost disadvantages, the cost of doing business being a major one. States must now take the lead in implementing the reform agenda. Land, labour and power remain important areas for reforms. We must aim to make India one of the easiest places to do business in.
Champion states as drivers of growth: India will only grow when states grow. States such as Uttar Pradesh, Bihar, Rajasthan, Odisha, Jharkhand and Chhattisgarh, among others, will have to grow much faster than the national average at rates of 10 per cent-plus to enable catch-up growth and broad-based per capita income growth. Much of the labour force in these states is employed in agriculture, and they must diversify their economies beyond it. Enabling reforms, sustainable urbanisation and a focus on improving socio-economic outcomes can yield multiplier impacts. n
The author is India’s G20 Sherpa, and former CEO of NITI Aayog. Views are personal
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