India needs to accelerate its structural reforms to transition to high-income country: Chief Economist, World Bank
India has achieved universal access to electricity, drinking water, banking facilities and sanitation: MoSPI Secretary
Global economic growth has been decelerating, with potential growth rate in advanced economies halved over the last two decades, and emerging markets and developing economies also experiencing a decline in potential growth rate, exacerbated by geopolitical tensions, trade fragmentation, policy uncertainty and persistent inflation, said Dr Indermit Gill, Chief Economist and Senior Vice President for Development Economics, The World Bank Group, speaking at the Global Economic Policy Forum 2024 organized by the Confederation of Indian Industry (CII) with the theme ‘Decadal Priorities for the Global Economy’ at New Delhi today.
Dr Gill noted that middle income countries, including India, are more prone to slowdown compared to low income or high income countries. He observed that the share of middle-income countries in global GDP has grown, but their productivity and efficiency remain significantly below those of high-income economies.
He further added that India is better positioned than many of its peers to navigate the current global challenges. Yet, he emphasized, “time is of essence for India to accelerate its structural reforms and the changes needed are not happening quickly enough”, urging policymakers to capitalize on economy’s strengths while addressing inefficiencies and fostering institutional resilience.
Dr Gill pointed to three major structural inefficiencies in India’s economy. The first is the underutilization of capital, with unproductive firms continuing to operate and limiting the potential for resource reallocation to more efficient, value-adding incumbent firms. The second inefficiency is in talent allocation. Despite the increasing demand for skilled labour, India continues to underutilize a significant portion of its talent pool, particularly women. The third challenge is energy efficiency. India’s energy-to-output ratios are high, making the country one of the most energy-intensive economies globally.
To transition to a high-income country, Dr Gill suggested that India should prioritize improving productivity through infusion of new technologies and innovation, particularly encouraging the growth of large firms as they are often the engines of innovation. He further stressed the importance of utilizing periods of economic crisis as opportunities to introduce structural reforms. Additionally, he noted that India must also embrace inclusive growth by providing equitable opportunities for all.
Dr Saurabh Garg, Secretary, Ministry of Statistics and Programme Implementation (MoSPI), Government of India remarked India’s substantial achievements over the past decade, particularly its advancements in providing universal access to electricity, banking facilities, clean drinking water and sanitation. He also highlighted significant reduction in poverty and inequality, as evidenced by improvements in the Gini coefficient and the multidimensional poverty index.
Dr Garg said that India has already attained 100 per cent Gross Enrolment Ratio (GER) in primary education and envisions to increase GER in higher education from 30 per cent to 50 per cent by 2035. Government initiatives such as PM Kaushal Vikas Yojana and PM Internship scheme are focused on harnessing India’s demographic dividend, he added.
Dr Garg highlighted India’s digital transformation from Aadhaar to widespread adoption of digital services such as UPI, Digi Locker, and Bharat Net. He also underlined India’s achievement of filing over one lakh patents in the last year and its emergence as a hub for global innovation, with the rapid rise of Global Capability Centres now operating in the country.
He further cited the establishment of key regulatory bodies like the Real Estate Regulatory Authority, the Insolvency and Bankruptcy Code, and the Goods and Services Tax framework, International Financial Services Authority, among others in the last few decades. These institutional changes, he noted, are essential building blocks for achieving middle-income status and beyond.
Dr Garg also highlighted India’s efforts in banking inclusion, which has been achieved in just seven years, far outpacing global averages, and the involving the private sector in energy distribution, breaking the monopoly of the state electricity boards. He further pointed to emerging sectors like green hydrogen as future growth drivers, citing the ambitious target of producing 5 million MT of green hydrogen annually by 2030.
Moderating the session, Dr Naushad Forbes, Past President, CII and Co-Chairman, Forbes Marshall noted that India, with a per capita GDP of US$ 2,500, is a middle-income country driven largely by the service sector but is still a capital and skill intensive country for its level of development.
12 December 2024
New Delhi