In the view of most analysts, India’s leading position in economic growth pace is likely to continue for the next two-three decades and the country could overtake the US to become the world’s second largest economy in purchasing power parity terms by 2050.
India has several key forces in its favor which will drive its productivity and thereby growth in the coming years. The first is population and the country’s sharp demographic advantage is well recognized. Over the next quarter century or so, India will have more people entering the workforce than any other country has ever experienced in its history. The second force is urbanization, a process which would see close to 600 million residents in cities by 2031. Urban agglomerations are productivity hubs, and with the right system of urbanization, the process itself will tend to generate higher growth.
The third is increasing levels of education and skill development arising from access to learning. Our literacy rates today are still low, but perhaps for the first time in our history, India will see an educated generation of workers that has been brought up by educated fathers and mothers. More people will enter college in India during the coming decade than any other country has seen in any decade till now. The fourth driving force is rising technology adoption, especially among India’s micro, small and medium sector or MSME. The current level of productivity in MSME is low due to restricted access to technology, but India is increasingly progressing on ICT attainments. Over 1 billion mobile phone connections are in place now, and access to the internet is rapidly expanding. With ICT connectivity, productivity and access to markets is likely to act as a disruptive force, some of which is already evident today.
Finally, even while there appears to be a pull- back from globalization, India’s low presence in global markets and competitive wage structure presages greater global integration in coming years. De-globalisation may not be a sustainable trend as the gains from global integration are evident. As more emerging economies step on to the global consumption platform, they will look for increased product variety which in turn will develop new supply chains and drive global trade. Within this, India’s current export to GDP share of 1.8% can certainly be built up, and this will act as an engine of growth in itself.
India has embarked on a comprehensive reform process that aims at strengthening market operations and enabling the private sector to grow rapidly. There is new entrepreneurial energy in the country, and it has emerged as home to the third largest number of startups in the world.
At the state level, there is strong emphasis on developing industrial parks in alignment with local resource capacities, along with efforts for skill development, investment facilitation, and international integration.
Source: CII Annual Session 2017: Theme Paper – Future of Globalisation: Can India Lead?