India needs to focus on building logistic capacity at its grassroots level, including upskilling its labour force, to create opportunities to achieve 6.7% growth through fiscal 2031, according to S&P Global's Deepa Kumar.
At an absolute grassroots-level, India needs to build up its logistics capacities to become more export-oriented, and secondly, it needs to upskill its labour, Kumar, the head of Asia Pacific country risk at S&P Global Market Intelligence, told BQ Prime's Muralidhar Swaminathan.
This will ensure quantity and quality in the manufacturing sector, she said.
Kumar sees the manufacturing sector growing hand-in-hand with India's services sector. Services is already contributing about 53-54% to India's GDP today, whereas the manufacturing sector is currently adding about 18%. The government has set up a target for the manufacturing sector to reach about 25% of its GDP in the next few years, Kumar said.
India can sustain its growth over the next decade, S&P Global said in its Aug. 3 report.
”We expect India to grow 6.7% per year from fiscal 2024 to fiscal 2031, catapulting GDP to $6.7 trillion, or Rs 555.15 lakh crore, from $3.4 trillion, or Rs 281.72 lakh crore, in fiscal 2023. Per capita GDP will rise to about $4,500, or Rs 3.73 lakh," the report said.
Competition To Be The Next 'Mantra'
The competition between state governments is the "next mantra" for the years ahead, according to Kumar. "It is not necessarily a bad thing. It is a question of acknowledgement," she said.
States will compete with each other, and sometimes there may be better terms, resources, and availability in one state as compared with the other, Kumar said. This is something that international governments and businesses need to work with as a prerequisite for operating in India as opposed to post-hoc consideration coming at a later point, she said.
Risks Or Opportunities?
Kumar identified one domestic and one external risk, which she also categorised as opportunities that India should not miss.
The demographic dividend question, which is the domestic risk, will be a differentiator for India, accorsding to her. One of the country's greatest strengths is that it has a labour force participation rate that is waiting to grow. "Less than 55% are actively employed, and among those, women are below 30%," Kumar said, citing surveys.
Increasing the role of women in active labour and upskilling will improve the quality and quantity of labour, she said. Calling this "absolutely crucial", Kumar said that it is a risk and a boat that India shouldn't miss.
The external risk is the geopolitical environment and advantage that India is currently navigating, said Kumar. There are major tailwinds that will take India from being a "balancing power to a leading power", according to her.
But it all depends on how India will negotiate with multilateral institutions for its objectives and build its key bilateral partnerships, Kumar said.
This is the "window of trade investment, just kind of the trust dynamics that India shouldn't miss". This, along with the opportunities that depend on how well India capitalises, will change the outlook for the nation, Kumar said.
Watch the full interview here:
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