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Source: The post is based on the article “Good, Do Better – For India, to be the fastest growing major economy isn’t enough. Real change needs 8% growth” published in The Times of India on 12th October 2023.
Syllabus: GS 3 – Indian Economy – Growth & Development
Relevance: measures needed for India to increase its growth rate.
News: According to the latest forecast by the International Monetary Fund (IMF), India is the fastest growing major economy in the world.
What are the key takeaways from the IMF’s forecast?
As per the IMF, India is expected to grow at 6.3% in 2023-24, followed by China at 5%. India’s growth rate is expected to remain the same next year, while China’s growth rate is expected to slow down to 4.2%.
The IMF also said that global growth has outperformed expectations of March-April 2022, due to the resilience of the Indian economy.
However, while India has shown remarkable economic growth, it’s important to note that there is a substantial gap with China, as China’s GDP is approximately five times greater.
Hence, to surpass China in contributing to global GDP, India would need to sustain an 8% growth rate for several years.
What are the challenges present with India in increasing its GDP growth rate?
The Indian economy needs to address structural challenges to push up the trend in growth from about 6.5% to 8%.
The government’s jobs data shows that a part of the labor force has gone back to agriculture, the sector with the lowest productivity.
In 2022-23, agriculture’s share of the workforce was 45.8%, over three percentage more than 2018-19, while only 11.4% of the workforce was in manufacturing.
This shift limits the potential for growth in private consumption, a critical part of the economy.
What can be the way ahead?
India needs to boost investment in traditional sectors like mining and utilities, which have a wider economic impact.
This is important because the focus on tech and manufacturing has led to construction surpassing manufacturing in job creation, which is concerning.
Hence, to close the economic gap with China and fulfill India’s geopolitical ambitions, a structural transformation is needed to have a greater impact on global growth.
