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INDIA RISKS STAGNATION: GDP SHOULD GROW OVER 8%

Focus: GS-III Indian Economy

Why in news?

India’s GDP needs to grow annually at 8-8.5% to create opportunities in the post COVID-19 era, and the country risks a decade of stagnating incomes and quality of life if urgent steps are not taken to spur growth, says McKinsey Global Institute (MGI).

Details

  • India will have to undertake a slew of reforms over the next 12-18 months with the aim of increasing productivity and creating jobs.
  • Given the increasing urbanisation and population trends, there will be 90 million additional workers in search of non-farm jobs by 2030 and India will have to triple job creation to 12 million gainful non-farm jobs per year from the 4 million achieved between 2013 to 2018.
  • The GDP, which is set to contract by over 5% in FY21 as per some estimates, needs to grow at 8-8.5% per annum for the next decade to create the opportunities, it said, warning of difficulties if it is not achieved.
  • On the reforms front, it advocated attention to manufacturing, real estate, agriculture, healthcare, and retail sectors, unlocking land which can reduce prices by up to a fourth, creating flexible labour markets, enabling efficient power distribution to reduce tariffs for consumers by over 20% and privatising 30 top state-run enterprises.

Financial sector reforms

  • From a financial sector perspective, it said reforms and streamlining fiscal resources can deliver $2.4 trillion in investment while boosting entrepreneurship by lowering the cost of capital for enterprises by about 3.5 percentage points and also pushed for creation of a ‘bad bank’ to take care of dud assets.
  • A bulk 60% of the reforms will have to be undertaken by the States and the remaining 40% by the Centre.
  • MGI pointed out that the manufacturing and the construction sectors offer the most opportunities for economic growth and also for higher employment.

-Source: The Hindu

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