Dr Gill points out structural inefficiencies in Indian economy
India is better positioned than many of its peers to navigate the current global challenges but time is of essence for New Delhi to accelerate its structural reforms as the changes needed are not happening quickly enough, cautioned a World Bank executive.
Dr Indermit Gill, Chief Economist and Senior Vice President for Development Economics, The World Bank Group, has urged Indian policymakers to capitalize on economy’s strengths while addressing inefficiencies and fostering institutional resilience.
He has also cautioned that middle-income countries, including India, are more prone to slowdown compared to low income or high-income countries, given decelerating global economic growth https://www.bseindia.com/.
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, he elaborated https://www.nseindia.com/.
Dr Gill was 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 on 12 Dec https://fieo.org/.
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 https://sbi.com.in/.
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 https://www.sgx.com/.
Additionally, he noted that India must also embrace inclusive growth by providing equitable opportunities for all.
Also, the forum heard positive achievements in the country from Dr Saurabh Garg, Secretary, Ministry of Statistics and Programme Implementation (MoSPI) https://www.conexpoconagg.com/.
He highlighted India’s substantial achievements over the past decade, particularly its advancements in providing universal access to electricity, banking facilities, clean drinking water and sanitation.
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% to 50% by 2035.
“Government initiatives such as PM Kaushal Vikas Yojana and PM Internship scheme are focused on harnessing India’s demographic dividend,” he added.
Further, 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 continued on the positive notes, citing 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 https://www.ibef.org/ .
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. Fiinews.com
