Powering up to Get to the $30-Trillion Economy Point
Context:
India aims to reach a $30-trillion economy by 2047, focusing on rapid economic growth through liberal policies and private sector engagement, despite concerns about income inequality.
Current Economic Achievements:
- Growth Rate: India’s GDP growth rate of over 7% makes it the fastest-growing large economy, with projections of the 21st century being “India’s century.”
- Caution: Despite these achievements, caution is needed to avoid the pitfalls that other countries at similar stages have faced.
The Challenge of Sustained Growth:
- Liberal Economic Policies: To achieve the $30-trillion economy target, India must sustain rapid growth through liberal policies that harness the private sector.
- Income Inequality: Criticisms of income inequality should not distract from the overall improvement in living standards facilitated by economic growth.
The Role of India’s Working-Age Population:
- Economic Growth and Poverty Alleviation: Since liberalisation in 1991, India’s poverty rate has dropped from 50% to 20%, lifting 35 crore people out of poverty.
- Labour Market Challenges: Despite progress, India’s female labour force participation rate (FLFPR) is only 37%, compared to 60%-70% in other rapidly growing economies.
Strategies for Growth:
- Export-Oriented Industrialisation: Emulating the success of the “Asian Tigers” (South Korea, Taiwan, Japan, Vietnam) by focusing on low-skilled, employment-intensive manufacturing with an emphasis on exports.
- Avoiding Protectionism: Resisting high import tariffs to protect domestic industries, which can lead to inefficiencies and inflated costs.
Vision India@2047:
- Objective: Achieving a $30-trillion economy with a per capita income of $18,000-$20,000 by 2047.
- Initiative: NITI Aayog’s Vision India@2047 involves structural changes and reforms, focusing on innovation, human development, social welfare, and environmental sustainability.
Navigating the Middle-Income Trap:
- Risks of Protectionism: Import tariffs can make Indian manufacturers less competitive, inflating costs and harming both manufacturers and consumers.
- Market-Led Economy: Encouraging a market-led economy with minimal government interference to foster private enterprise and improve the ease of doing business.
Building Industrial Clusters:
- Government Initiatives: Developing industrial clusters with comprehensive infrastructure to address cost disabilities and low labour productivity.
- Cluster-Led Development: Relaxing stringent regulations in designated areas to create favourable conditions for manufacturing.
Way Forward to Achieve Vision 2047:
- Harnessing the Demographic Dividend: Focusing on upskilling the youth to prepare them for future job markets and make them industry-ready.
- Increasing Investment in Education: Raising government expenditure on education to match the global average of 4.5% of GDP.
- Promoting Inclusive Growth: Boosting female participation in the labour force and ensuring wage parity.
- Unlocking Manufacturing Potential: Expanding the manufacturing sector’s contribution to the economy from 15% to 25% through initiatives like the Production Linked Incentive (PLI) scheme.
Conclusion:
India must leverage private sector strengths and pursue reforms to enhance industrial growth in sectors like electronics and apparel. Monitoring indicators such as inter-state migration, urbanisation, and FLFPR will help assess progress towards becoming a $30-trillion economy. By addressing challenges with forward-thinking policies and ambitious goals, India can achieve its economic objectives and fulfil its potential as a global economic leader.