India’s GDP needs to grow annually at 8-8.5% to create opportunities in the post COVID-19 era, and the country risks a decade of stagnating incomes and quality of life if urgent steps are not taken to spur growth, says McKinsey Global Institute (MGI).
India will have to undertake a slew of reforms over the next 12-18 months with the aim of increasing productivity and creating jobs, MGI said in a report.
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Given the increasing urbanisation and population trends, there will be 90 million additional workers in search of non-farm jobs by 2030 and India will have to triple job creation to 12 million gainful non-farm jobs per year from the 4 million achieved between 2013 to 2018, it said.
The GDP, which is set to contract by over 5% in FY21 as per some estimates, needs to grow at 8-8.5% per annum for the next decade to create the opportunities, it said, warning of difficulties if it is not achieved. On the reforms front, it advocated attention to manufacturing, real estate, agriculture, healthcare, and retail sectors, unlocking land which can reduce prices by up to a fourth, creating flexible labour markets, enabling efficient power distribution to reduce tariffs for consumers by over 20% and privatising 30 top state-run enterprises.
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Financial sector reforms
From a financial sector perspective, it said reforms and streamlining fiscal resources can deliver $2.4 trillion in investment while boosting entrepreneurship by lowering the cost of capital for enterprises by about 3.5 percentage points and also pushed for creation of a ‘bad bank’ to take care of dud assets.
A bulk 60% of the reforms will have to be undertaken by the States and the remaining 40% by the Centre, it added.
MGI pointed out that the manufacturing and the construction sectors offer the most opportunities for economic growth and also for higher employment.