A recent World Bank report underscores that India must maintain an average annual growth rate of 7.8% to establish itself as a high-income economy by 2047. Significant reforms in financial, land, and labor markets are essential. The report emphasizes investment in human capital, job creation, and leveraging demographic advantages while suggesting a framework for tailored economic strategies across states.
India must enhance its reform efforts to achieve an average annual growth rate of 7.8% in order to become a high-income economy by 2047, as indicated by a World Bank report released recently. This transformation requires significant reforms in India’s financial, land, and labor markets to support sustainable economic progress. The Wealth Bank’s memorandum, titled “Becoming a High-Income Economy in a Generation,” emphasizes that maintaining past growth rates will not suffice for such ambitious goals.
The report highlights that India has experienced substantial growth, averaging 6.3% between 2000 and 2024. To reach the targeting of becoming a high-income economy by 2047, India’s gross national income (GNI) per capita must increase nearly eightfold. Continued acceleration of growth over the next two decades is crucial to achieving this goal, which has only been accomplished by a few other nations. The report urges India to expand and deepen its reform agenda in light of the less favorable external economic environment.
In recent years, India has taken strides in various structural reforms aiming to shift towards becoming a global manufacturing hub, enhancing infrastructure, improving human capital, and driving digitization amidst maintaining macroeconomic stability. The report emphasizes, “To reach high income by 2047, India’s growth rate needs to average 7.8% in real terms… an ‘accelerated reforms’ package would put India on track for this target.”
Auguste Tano Kouame, the World Bank India country director, suggests that India learn from the experiences of Chile, Korea, and Poland, which successfully transitioned from middle-income to high-income status. The report acknowledges India’s impressive development over the past two decades, noting that its economy has grown nearly four times while GDP per capita has tripled. Today, India ranks as the fifth-largest economy globally, with substantial reductions in extreme poverty and enhanced public service delivery.
The World Bank proposes that India leverages its demographic advantage by investing in human capital and creating an environment conducive to job creation, with an emphasis on increasing female labor force participation. Over the past three fiscal years, India has achieved an average growth rate of 7.2%, which will need to continue in a bid to reach the necessary 7.8% growth.
To achieve the desired growth, the report outlines four critical policy areas for action: increasing investment, promoting structural transformation, and creating more jobs. Specific measures include easing land access, enhancing agricultural productivity, facilitating labor mobility, improving both physical and digital infrastructure, and optimizing public spending on human capital.b
Furthermore, the report highlights the importance of encouraging private sector investments in job-rich sectors such as agro-processing, hospitality, and transportation to harness India’s demographic dividend. Enhanced infrastructure, modern technology adoption, streamlined labor regulations, and reduced compliance burdens are essential for increasing productivity and competitiveness. These steps will enable India to align with peers like Thailand and Vietnam in their participation within global value chains.
For boosting investment, strengthening financial sector regulations and removing barriers to credit for micro, small, and medium enterprises (MSMEs) is vital. The report recommends a selective policy approach that allows less developed states to focus on fundamental growth aspects, while more developed states could pursue next-generation reforms aimed at enhancing their business environments and participation in global markets.
The Indian government can play a pivotal role by implementing more incentive-driven federal programs to support lagging districts and states. Enhanced incentives and capacity-building initiatives will help improve expenditure efficiency in low-income states, assisting them in catching up with their more prosperous counterparts.
The World Bank report serves as a call to action for India, emphasizing the necessity of comprehensive reforms to achieve a high-income status by 2047. Key recommendations include enhancing investment in critical sectors, maximizing the demographic dividend, and improving infrastructure while ensuring supportive policies for all states. The ambitious growth targets highlight the importance of maintaining a steady growth pace, requiring a concerted effort by India’s government and policymakers.
Original Source: www.ndtv.com
