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Calibrating a strategy for India’s future growth
Context:
Raising the savings and investment rates, improving the skill acquisition of young entrants to the labour market and adopting an employment-friendly technology mix must be the focus areas.
Economic Growth Projections
- Global Trends: RBI projects India's 2023-24 growth at 7%, while IMF and World Bank estimate 6.3%.
- Factors contributing: Deglobalization trends due to geopolitical conflicts impact supply chains and international settlements.
- Future estimates:India needs to recalibrate its growth strategy in light of changing global conditions.
Domestic Growth Drivers
- Dependency on Domestic Growth: India's export-led growth strategy may no longer be viable; focus on domestic growth.Concerns about the fall in household sector savings, critical for government and corporate investment.
- Employment Growth Challenges:India faces unique challenges with a potentially employable population amid labor-saving technologies.The working-age population share peaks in 2030; resources need to be allocated for training and skilling.
- Non-agricultural growth must absorb labor released from agriculture and address the impact of new technology.
Way forward
- Climate Initiatives and Growth Impact: India commits to carbon reduction targets, emphasizing green initiatives and climate-friendly technologies.
- One Escape out: Service sector growth could mitigate the adverse impact of climate-promoting technological changes.
- Fiscal Responsibility for Growth: Adhering to fiscal responsibility targets is critical for sustained growth.Achieving fiscal deficit and debt to GDP ratios of 6% and 60%, respectively, is essential.
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