Will India become the next big economic powerhouse?
It took about 58 years for India’s GDP to grow to $1 trillion, but only eight years to reach $2 trillion (by 2016). At current growth rates, it will take about five years to reach $3 trillion, and only three years after that to add the next trillion. Becoming a $10-trillion economy is now within India’s planning horizons.
But the real prize is larger than a mere number. India also has an opportunity to build a more inclusive, sustainable and equitable society, one that is an example to the rest of the world. Achieving that goal, however, requires successfully tackling several key developmental obstacles that stand in the way
A Potent Cocktail
One such challenge is finding a path to sustainable urbanisation. India’s cities are home to 377 million people, a number that could reach 900 million by 2050. Meeting the infrastructure needs of India’s urban population while safeguarding the environment will require new, innovative models.
A second challenge is addressing gender inequality and increasing women’s participation in the economy. Women today contribute less than a fifth of India’s GDP and make up just 24% of the workforce, compared to 40% globally. Without much stronger participation from them, India will continue to fall short of its economic potential.
A third challenge is that too much of India’s population still lacks access to basic living essentials, education and healthcare. Major progress has been made on providing electricity and sanitation to households, but there is still much more to be done to raise India’s ‘ease of living’ index. On education, 61 million Indian children are not in school. On healthcare, India’s spend per-capita remains among the lowest in the world, with 60-70% paid by patients out-of-pocket.
Finally, India needs to continue building its domestic energy sector to reduce its dependence on imports — currently covering 80% of its energy use. Primary energy demand is projected to grow by 3.5-4% a year through 2030. New approaches and sources of energy production will be needed to bridge this gap and strengthen India’s energy security in the years to come.
To further address some of these challenges, three specific opportunities require collaboration across the private, public and social sectors:
1) Digital transformation: India has the second-largest internet subscriberbase in the world, with an estimated 431 million people connected. Buildingon this foundation and harnessing the next wave of digitisation represent an opportunity to make rapid and substantial improvements to standards of living, while jolting economic growth. Broadening internet access is the great equaliser and nearly every sector in India would benefit.
For example, online agricultural marketplaces could be created covering 40-60% of all agricultural produce sold. Pilot projects have demonstrated that these marketplaces boost prices and farmers’ incomes by as much as 15%. In the industrial sector, digitisation of supply chains could improve inventory-handling efficiency by over 20%
Right Recipe, For Starters
Finally, small and medium enterprises (SMEs) could be better served by the financial services sector through digital and data-driven credit evaluations. By 2025, these advances could close 60-80% of the credit gap that SMEs currently face.
2) Renewable energy: Innovation in renewables and energy storage has a dual benefit. First, it can help India cut its dependence on energy imports. Second, it will help tackle pollution problems, which threaten to make India’s cities unliveable.
In the next three years, falling costs of energy storage and solar power could make power from solar-wind-battery hybrid plants cost the same as that from coal plants. Creating incentives for investment in these hybrid plants could grow renewables as a share of India’s energy mix by 300 GW or more by 2030. On electric vehicles, India could put in place economic incentives for consumers and manufacturers to drive faster adoption.
3) Gender parity: Increasing the role of women in India’s economy represents a $750-billion opportunity by 2025. Core to this aspiration is raising the female labour force participation rate by 10 percentage points — closer in line with Sri Lanka and Bangladesh, although still lower than in Indonesia or the Philippines.
While there is no single silver bullet to close the gender gap, there are a few good places to start. These include expanding skills training and job placement programmes, increasing access to credit and markets for ‘micro-entrepreneurs’, and addressing gender disparities in internet access. Companies can also contribute by doubling down on initiatives to recruit, retain and promote more women, for instance, by offering more flexible working models and investing in capability building.
More fundamentally, however, societal attitudes towards women in the workforce will also need to evolve. Seventy per cent of Indian respondents surveyed in the World Values Survey agreed with the statement that “when a woman works for pay, her children suffer”.
There is no doubt that India is ready to take its place as a global economic powerhouse. Doing so will require new approaches and priorities that will allow the country to capture its full potential. And be a role model for the rest of the world, too.