In the latest report by McKinsey Global Institute (MGI), ‘India’s turning point: An economic agenda to spur growth and jobs, it was found that that the country needs to create at least 90 MN jobs by 2030 as a new generation reaches working age, millions of workers move from farm work to better paid jobs in other sectors, and more women participate in the labor force. Creating that many jobs will in turn require a strong boost to GDP growth, which will need to average between 8 and 8.5 percent every year from 2023 to 2030. This is an ambitious goal, given the slowdown in the year leading up to the COVID-19 pandemic, and the extreme economic uncertainties posed by the crisis itself; yet, not taking steps to address the growth imperative now could mean a decade of stagnation, with low income growth and rising unemployment.
MGI identifies key opportunities for the economy in the decade ahead and proposes options for an agenda to maintain its status as an “outperformer” emerging economy. While central government and business will play key roles, so too will India’s states, which will drive about 60 percent of the reforms, the report finds.
The report identifies 43 business opportunities that could contribute $2.5 trillion of economic value and support 30 percent of nonfarm jobs in 2030. These stem from global trends such as rapid progress in automation and artificial intelligence, shifts in global value chains based in part on changing geopolitics, and growing efforts to tackle climate change.
The report also identifies reforms in six areas to raise productivity and competitiveness. About half of them could be implemented via policy or law. They are:
- Sector-specific pro-growth policies to attract investment in manufacturing, real estate, agriculture, healthcare, and retail
- Unlocking supply in land markets to reduce land costs by 20 to 25 percent
- Creating flexible labor markets for industry with better benefits and safety nets for workers
- Enabling efficient power distribution to reduce commercial and industrial tariffs by 20 to 25 percent
- Privatizing 30 or so of the largest state-owned enterprises to potentially double their productivity
- Improving the ease and reducing the cost of doing business
The report finds that the corporate world will also need to evolve. Large companies with more than $500 MN in revenue are key drivers of productivity and economic growth among the best-performing emerging economies, and India is no exception. It has about 600 such large firms, and the report finds that India could triple that number, as more than 1,000 midsize companies and 10,000 small companies scale up and lends greater competitive dynamism to the economy. “Competitive firms operating at scale are essential drivers of growth and innovation. India must address its “missing middle” of firms and enable many more to climb the ladder of scale and competitiveness, by improving access to capital and easing other barriers to firm growth” said Gautam Kumra, Managing Partner, McKinsey & Company in India and co-author of the report.