India Will Need To Grow 7.8% On Average Over 22 Years To Reach 2047 Goal: World Bank

India will need to grow by 7.8% on average over the next 22 years to achieve the country's aspiration of reaching high-income status by 2047, according to a new World Bank report published on Friday.

Recognising India's fast pace of growth averaging 6.3% between 2000 and 2024, the India country economic memorandum titled, 'Becoming a High Income Economy in a Generation,' stated that it is possible to achieve the target. Getting there, however, would require reforms and their implementation to be as ambitious as the target itself, the report stated.

The report evaluates three scenarios for India's growth trajectory over the next 22 years. The scenario which enables India to reach high-income status in a generation, requires India to achieve faster and inclusive growth across states, increasing total investment from current 33.5% of GDP to 40% (both in real terms) by 2035, increasing overall labour force participation from 56.4% to above 65%; and accelerating overall productivity growth.

“India can take advantage of its demographic dividend by investing in human capital, creating enabling conditions for more and better jobs and raising female labour force participation rates from 35.6% to 50% by 2047,” said Emilia Skrok and Rangeet Ghosh, co-authors of the report. 

In the past three fiscals, India has accelerated its average growth rate to 7.2%. In order to maintain this acceleration and attain an average growth rate of 7.8% over the next two decades, the Country Economic Memorandum recommends four critical areas for policy action:

• Increasing investment: More private and public investment (increasing the real investment rate from around 33.5% of GDP to 40% by 2035) will be fundamental to long-term growth. The report notes actions such as strengthening financial sector regulations, removing constraints to formal credit for micro, small, and medium enterprises, and simplifying foreign direct investment policies will be critical.

• Fostering an environment to create more and better jobs: The report recommends incentivising the private sector to invest in job-rich sectors like agro-processing manufacturing, hospitality, transportation, and care economy. This requires targeted strategies for labour-intensive sectors, a bigger skilled workforce, greater access to finance and fostering an innovation-driven economy. 

• Promoting structural transformation, trade participation and technology adoption: Currently the share of agriculture in employment is 45%. Allocation of land, labour and capital to more productive sectors, like manufacturing and services, can help raise firm and labour productivity. Strengthening infrastructure, adopting modern technology, streamlining labour market regulations and lowering the compliance burden on firms will further drive productivity and competitiveness.

• Enabling states to grow faster and together: The report argues for a differentiated policy approach, whereby less developed states could focus on strengthening the fundamentals of growth (health, education, infrastructure, etc.), while more developed states could prioritise the next generation of reforms (better business environment, deeper participation in GVCs, etc.).