Indias Incredible Growth Potential
India is on track to becoming an economic superpower by 2029, but some challenges remain. These can be easily overcome
INDIA has displayed exceptional economic stability in a year riddled with volatile commodity shocks and high global food prices. The government, along with the Reserve Bank of India ( RBI), deserve plaudits for swift and proactive management of inflation.
However, what gives strength to India’s economic ambitions is its consistent contribution to the global economy, especially in the aftermath of the Covid-19 pandemic. The country is cur- rently the world’s second-largest manufacturer of a range of products, such as mobile phones, steel, cement, pharmaceuticals, and many more. The production- linked incentive ( PLI) scheme has been a success for the Make in India initiative, and is expected to attract capex of around ` 1.96 lakh crore over the next few years. This is also reflected in the growth in the contribution of manufactur- ing to India’s GDP during the second quarter of 2023- 24.
Agriculture
India’s farmers have tilled for decades to feed our growing population, now estimated to be the largest in the world. We are the world’s largest producer of milk and millets, and the second-largest producer of rice, wheat, and sugar.
India’s labour-intensive farm sector has seen a steady rise in pro- ductivity; as a result, the percentage of employment has reduced to 45% of the working population. Higher farm productivity depends on adapting innovation at scale. The process has already started in some ways. India’s $30- billion agri- tech industry is connecting the hin- terland to hi- tech labs, leveraging climate- smart methods backed by sensor and surveillance technolo- gies, data- driven insights in farm- ing, frugal farming techniques, and
seller platforms. However, innovation is not just limited to technology but also to crop addi- tives and bio- stimulants.
Unlocking more for 2029There
is now global consensus that estimates the Indian economy to grow within a range of 6.3- 7% for the year 2023-24. On a conserva- tive basis, India will be a $ 5-trillion economy by 2027-28. This makes India the only major economy in the world to grow at such a robust pace, year after year. Fundamental differentiators, such as the world’s largest working population, stable democracy, and an entrepreneurial mindset, coupled with structural differentiators such as the low external debt to GDP ratio, low vola- tility of the national currency, and high rate of adoption of digital stack solutions, make for a compelling bet.
Although the Ease of Doing Business rankings, as measured by the World Bank, have improved considerably, there are low- hanging fruits that can quickly propel India’s position even higher than its cur- rent 63rd position.
Cost competitiveness in manufacturing is one such area. Currently, logistics cost are around 18% of GDP, as against 10% for Asian peers such as Vietnam and Bangla- desh, making some of our exports uncompetitive. The government is fully cognisant of this, and is making every effort to boost infra- structure, diversify supply chain, reduce bottlenecks, and open up markets with a free flow of people and goods. With infrastructure spending expected to double to over ` 140 lakh crore until FY30, execu- tion and implementation hold the key to changing the game.
With an eye on net zero by 2070, the government is well on its course to achieving a non-fossil fuel- based generation capacity of 500 GW by 2030. The private sector, along with state utilities, have committed over $200 billion to be invested till 2030, in India’s energy sector. Notably, the policy thrust around green hydrogen, sops for advanced chemistry cell (ACC) batteries, and developing ‘Aatmanirbharta’ in critical minerals are steps towards diversifying India’s energy mix. I believe that in the foreseeable future too, the government shall continue its strategic geopoliti- cal measures as a means to ensure energy security and transition.
The implementation of social schemes by the Centre and the states to ensure welfare of those at the bottom of the pyramid shall continue to play a key role in overall socioeconomic develop- ment. The government’s National Family Health Survey reported a significant decline of 9.89 percent- age points in poverty in a span of just five years, with around 15% of the population being multi- dimen- sionally poor as of 2021.
The way forward
A couple of measures that can play a decisive role in India’s development trajectory are: better Centre- state coordination and a faster economic growth amongst the less developed states. The benefits of GST are now visible, and therefore similar initiatives that cut across sectors would be most welcome. A roll- out of best practices across the country would reduce the compli- ance burden and lower the cost of conducting business. Further, states with low per capita income have enough headroom for faster growth, which will raise the overall growth numbers as well as reduce intra- state inequalities.
India’s labour productivity is currently quite low for a variety of historical reasons. In some quar- ters, there is debate on whether we should focus on manufacturing or services to improve productivity. I don’t think we have a choice, given the sheer numbers seeking liveli- hoods with varying skill levels.
As the world’s largest democ- racy heads into its 18th General Elections, India’s tryst with Bharat will continue its onward journey. A stable policy environment, supplemented with a renewed spurt in strategic investments, FDI inflows, and corporate capex outlay will certainly make India the third-largest economy in the world before the end the decade.
The author is Chairman and Senior Managing Director of DCM Shriram Limited. Views are personalA
COUPLE OF MEASURES THAT CAN PLAY A DECISIVE ROLE IN INDIA’S DEVELOPMENT TRAJECTORY ARE: BETTER CENTRE-STATE COORDINATION AND FASTER ECONOMIC GROWTH