India needs to expedite its structural reforms to transition into a high-income country, according to World Bank Chief Economist Indermit Gill. Speaking at the Confederation of Indian Industry’s (CII) Global Economic Policy Forum 2024, Gill emphasized the need for India to prioritize certain key areas, including innovation and productivity enhancement, to achieve its goal of becoming a high-income nation. He stressed that fostering the growth of large companies would be essential, as they often act as engines for innovation.
Gill highlighted three major structural inefficiencies within India’s economy that need urgent attention:
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Underutilization of Capital: There is a need to curb the activities of unproductive enterprises and redirect resources to more efficient organizations.
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Underutilization of Talent: Specifically, the underuse of women’s talents in the workforce needs to be addressed.
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Energy Efficiency: India ranks among the countries with the highest energy inefficiency rates, and more effective use of energy is crucial for sustaining growth.
Gill also noted that while global economic growth is slowing, even developed economies have seen a decline in their growth rates over the past two decades. To achieve rapid development, he suggested that India should leverage periods of economic crises as opportunities to implement structural reforms.
Private Sector Key to India's Growth, Says Report
Meanwhile, in line with the World Bank’s suggestions, several reports emphasize the role of private sector partnerships in India’s growth. A recent report by Knight Frank India, a global real estate consultancy, stated that India will require $2.2 trillion in investment to develop its infrastructure and reach a $7 trillion economy by 2030. The report also projects a compound annual growth rate (CAGR) of 10.1% between 2024 and 2030, provided the necessary investments are made.
Shishir Baijal, Chairman and Managing Director of Knight Frank India, noted that the Indian government has increased its budget allocation for infrastructure development in recent years. This has resulted in improved logistics performance, with India’s ranking in the Logistics Performance Index rising from 54th in 2014 to 38th in 2023.
Baijal stressed that the private sector's role in economic and infrastructure growth is crucial but remains limited. He called for more proactive measures to attract private investment, which is vital for sustained, long-term economic growth.
However, the report cautioned that an overreliance on government expenditure for infrastructure development could jeopardize fiscal deficit targets. The share of private sector participation in infrastructure development has decreased significantly, from 46.4% of total investments between 2009-13 to just 7.2% between 2019-23. The government’s target to reduce the fiscal deficit to 4.5% of GDP by 2025 aligns with efforts to boost private sector involvement.
By increasing private sector participation, the report suggests that India can redirect government spending towards other critical sectors such as healthcare, human capital development, and debt servicing, ultimately contributing to the country’s long-term economic growth.
