NITI Aayog’s governing council summit will see the Prime Minister and chief ministers discuss a plan for India to become a developed nation by 2047, the 100th year of Independence. What opportunities and challenges should this blueprint factor in? Mint explains:
How fast should India’s economy grow?
Based on gross national income (GNI) per capita, the World Bank classifies countries as low, lower-middle, upper-middle and high- income. India is currently a lower-middle income country with a GNI per capita of $2,170. It will have to jump two thresholds to become a high-income country—an income greater than $13,205 is currently categorized as high-income. A Mint calculation shows that if India’s GNI per capita for the next 25 years grows at the same rate as that for the last 25 years, it will fall short of the high-income threshold. India’s income needs to grow at 9-10% in the upcoming period to touch the mark.
Can India grow at the required rate?
India notched up a remarkable rate of growth in the 2000s, but this slowed down during the 2010s. India took just five years, from 2003-04 to 2008-09, to double its income from $520 to $1,000, which helped it shed the tag of a ‘low income’ country. However, it then took 10 years to further double its income. This shows that even before the covid-19 pandemic struck, pushing its target year of becoming a $5 trillion economy from 2024-25 to 2026-27, India had been slowing down. While the economy has picked up, it will not be easy to sustain the growth rate as the base expands.
What is the plan likely to look like?
The government will likely focus on seven-to-eight areas that are vital for the economy and human development. Small businesses will be a focus for job creation. Then there’s growth in manufacturing and exports. Agro, food processing and capital expenditure will also get attention as will the ease of doing business and women’s labour force participation.
What can work in India’s favour?
At a median age of 28.2, India is a young country, and its working age population (15-64 years) will only shrink from 2065. This means more young Indians entering the workforce, earning money and driving demand. The same can’t be said for China, which is rapidly ageing. Second, developed countries are looking to diversify manufacturing bases beyond China. India must seize on the global supply chain realignment and cement its place as a manufacturing alternative to China.
What are the key challenges?
Pushing jobs and manufacturing needs private investments, which have been sluggish for over a decade. An attempt to crowd in private investments through public spending has not worked. There’s great deal of interest in production-linked incentives but state policies will be key. Boosting female labour force participation, which has dropped significantly in the last two decades, is much needed. This drop, and the unemployment rate, indicate that India is struggling to tap the demographic dividend.
