India, boasting robust GDP growth of 7.8% in the first quarter of the 2023-24 fiscal year, positioning it as the fastest-growing nation in the Group of Twenty, is on track to achieve its ambitious US$5 trillion economy target by 2026-27.
At this critical juncture, India is undergoing a significant economic transformation, influenced by a dynamic interplay of factors that reshape both its economic terrain and demographic structure.
Several notable aspects define India’s current economic scenario. Projections from the Economic Survey 2022-23 highlight anticipated GDP growth ranging from 6.0% to 6.8% in fiscal 2023-24, with baseline growth of 6.5% in real terms.
However, inflation remains a persistent concern, prompting recent fiscal and monetary policies, including the central bank’s increase in key interest rates in 2022 to curb inflation. The government has implemented fiscal measures to address economic challenges.
Sectoral opportunities
India’s primary sector presents diverse opportunities to drive economic growth. The agricultural sector, a significant source of employment, not only contributes to poverty reduction but also ensures overall financial stability.
Initiatives like the National Mission for Sustainable Agriculture underscore the importance of technological advancements to make Indian agriculture future-ready, incorporating scientific warehousing practices.
Recognizing the sector’s pivotal role in India’s gross domestic product, recent government measures, including increased investment, long-term growth focus, and policy reforms, aim to enhance its economic contribution.
Global integration with food markets and productivity gains further emerge as avenues for economic development in agriculture. Addressing critical issues such as sustainable practices becomes paramount, given the large population dependent on agriculture for food security.
These opportunities align with the overarching goal of achieving economic growth and self-reliance in the agricultural sector.
While the manufacturing sector holds promise for integration into global value chains (GVCs), it grapples with the task of balancing scale with labor requirements. Navigating this challenge is crucial for India to leverage opportunities and address associated challenges, ensuring sustainable economic growth and increased employment for its growing population.
Opportunities abound for domestic manufacturing to strengthen its position within GVCs, enhancing the scale of its operations. However, the sector is poised to become more capital-intensive, leading to a subsequent reduction in demand for labor. Striking a balance between scaling up operations and managing the surplus labor force will be a critical challenge in the coming decade.
Labor-intensive sub-sectors within manufacturing can play a pivotal role in achieving a net increase in productivity during this transition. India’s export basket, including electronics, automobiles, iron and steel, signals increased manufacturing capacity and competitive refining services.
Labor-intensive export sectors such as toys, textiles, footwear and furniture have significant potential to generate domestic jobs and should be prioritized for growth and development.
The service sector, though employing a smaller percentage of the population compared with East Asian counterparts, consistently contributes to the national gross value added (GVA). The construction industry has shown remarkable promise within the industrial sector, with its workforce steadily expanding over the last two decades.
With 1.6 million employees, the banking sector sees a significant portion (49.1%) working in the public sector. Additionally, the emergence of gig workers, currently constituting 1.5% of the workforce, is expected to increase their contribution to total employment to 4.1% by 2029-30.
Government initiatives
The synergy between government initiatives and policies and a dynamic workforce can foster a conducive environment for job creation in India.
Noteworthy government programs include the Digital India Program, launched in 2015, which seeks to transform the nation into a knowledge economy through initiatives promoting digital literacy, expanding digital infrastructure, and enhancing e-government services.
The Pradhan Mantri Kaushal Vikas Yojana (PMKVY), also initiated in 2015, concentrates on skill development by offering free, short-duration skill training programs and providing monetary incentives upon skill certification.
The Startup India Initiative, launched in 2016, supports startups by simplifying registration, offering tax exemptions, and creating a dedicated fund, generating more than 900,000 jobs.
The Production-Linked Incentive in strategic sectors, launched in 2020, aims to strengthen manufacturing in critical sectors, leading to a substantial increase in foreign direct investment and the potential creation of 6 million jobs in five years.
Last, the Pradhan Mantri Vishwakarma Yojana, launched this September, extends financial assistance and skill-development support to traditional artisans and craftsmen, preserving traditional industries and fostering entrepreneurship.
Finally, as of January this year, India became the world’s most populous nation, surpassing China’s population of 1.417 billion. This demographic shift underscores the importance of harnessing India’s extensive human resources, particularly its young population, to strengthen its economy and establish itself as a global presence.
With more than 52% of its population below the age of 30 and a substantial Internet penetration rate of 43%, India holds significant potential.
Leveraging this demographic dividend through education, skill development, and job creation can boost economic growth, presenting both opportunities and challenges that require effective resource management and provision for the growing workforce.