Focus: GS-III Indian Economy
Why in news?
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).
Details
- India will have to undertake a slew of reforms over the next 12-18 months with the aim of increasing productivity and creating jobs.
- 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.
- 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.
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.
- MGI pointed out that the manufacturing and the construction sectors offer the most opportunities for economic growth and also for higher employment.
-Source: The Hindu
