A World Bank report indicates that India must accelerate reforms to achieve a 7.8% average annual growth rate and become a high-income economy by 2047. Key reforms in the financial sector, land, and labor markets are essential. While India has seen a notable economic growth, its GNI per capita needs to increase nearly eight-fold. The report identifies critical areas for action, including investment in human capital, job creation, and enhancing infrastructure. It recommends tailored strategies for less and more developed states and emphasizes the need for a robust private sector and innovative economic strategies to boost productivity and competitiveness.
New Delhi:
According to a World Bank report released on Friday, India must expedite its reforms to achieve an average annual growth rate of 7.8 percent to transition into a high-income economy by 2047.
The World Bank highlighted that achieving this target requires reforms not only in the financial sector but also in the land and labor markets, as detailed in its India Country Memorandum titled ‘Becoming a High-Income Economy in a Generation’.
The report recognizes India’s impressive growth rate of 6.3 percent between 2000 and 2024, noting that the country’s past successes lay a solid groundwork for its future aspirations.
“However, to accomplish the ambitious aim of becoming a high-income economy by 2047, India cannot continue under a business-as-usual approach… The gross national income (GNI) per capita would need to grow nearly 8 times from current levels; growth must accelerate and remain high over the next two decades, which is a challenge few nations have managed,” the report stated.
“Given the current less favorable external conditions, India must not only sustain its ongoing initiatives but also broaden and intensify reforms,” the World Bank report emphasized.
In recent times, India has initiated several structural reforms aimed at transforming into a global manufacturing hub, enhancing infrastructure, upgrading human capital, and leveraging digitization, all while ensuring macroeconomic stability.
“To achieve high income status by 2047, India must maintain an average growth rate of 7.8 percent in real terms for the upcoming decades… Only an ‘accelerated reforms’ strategy will place India on the path to becoming high-income by 2047,” the report concluded.
Auguste Tano Kouame, World Bank India country director, cited lessons from countries like Chile, Korea, and Poland, which successfully transitioned from middle-income to high-income status by enhancing their integration into the global economy.
The report highlighted that India has progressed at a scale and speed that was once deemed improbable over the past decades.
From 2000 to the present day, in real terms, the economy has expanded nearly four times, with GDP per capita almost tripling. As India outperformed global growth, its share in the global economy has surged from 1.6 percent in 2000 to 3.4 percent in 2023, making it the world’s fifth-largest economy.
“This extraordinary development narrative is also marked by a significant reduction in extreme poverty and considerable enhancements in service delivery and essential infrastructure. Building on these milestones, India aspires to achieve high-income country status by 2047,” the report added.
According to Kouame, India can forge its own course by accelerating reforms and leveraging its prior accomplishments.
The report explores three potential scenarios for India’s growth path over the next 22 years.
“India can make the most of its demographic dividend by investing in human capital, creating favorable conditions for more and better employment opportunities, and aiming to elevate female labor force participation rates from 35.6 percent to 50 percent by 2047,” stated Emilia Skrok and Rangeet Ghosh, co-authors of the report.
The report mentioned that India has increased its average growth rate to 7.2 percent over the last three fiscal years.
To sustain this growth acceleration and reach an average growth rate of 7.8 percent (in real terms) over the next two decades, the Country Economic Memorandum identifies four critical areas for policy action, including boosting investment, promoting structural transformation, and creating more jobs.
For India to attain the status of a high-income economy by 2047, its GNI per capita must increase nearly 8-fold from current levels; growth must not only accelerate but also be sustained for the next twenty years, a challenge few countries have successfully navigated.
To achieve this goal, especially in a less favorable external context, India will need to not only preserve current initiatives but also expand and intensify reforms, including facilitating land access, enhancing agricultural productivity, allowing labor mobility to elevate productivity, improving both physical and digital infrastructure, and optimizing public spending efficiency on human capital development.
The report recommends encouraging private sector investment in job-rich sectors like agro-processing, manufacturing, hospitality, transportation, and the care economy to capitalize on India’s demographic dividend fully.
This approach necessitates targeted strategies for labor-intensive sectors, a larger skilled workforce, enhanced access to finance, and fostering an innovation-centric economy, it asserted.
Furthermore, the report indicated that strengthening infrastructure, adopting modern technologies, streamlining labor market regulations, and reducing compliance burdens on businesses will increase productivity and competitiveness, helping India catch up with peers like Thailand, Vietnam, and China in Global Value Chain (GVC) participation rates.
Regarding investment enhancement, the report highlighted that improving financial sector regulations, eliminating barriers to formal credit for micro, small, and medium enterprises (MSMEs), and simplifying foreign direct investment (FDI) policies are essential.
A differentiated policy approach is suggested where less developed states could focus on establishing fundamental growth factors (health, education, infrastructure, etc.), while more developed states should prioritize advance reforms (such as better business environments and deeper integration into GVCs).
The central government can facilitate this developmental process through more incentive-driven federal programs, like the recently launched urban challenge fund, to support better performance in lagging districts and states, the report suggested.
Increased incentives and capacity-building efforts will enable low-income states to enhance public expenditure efficiency and allow them to catch up with leading states, it added.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)