By Citi GPS,
February 26, 2018
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How India can transform itself from an emerging economy to one that grows with
a sustained GDP growth rate of 8%
An emerging economy aspiring to grow at a sustained high gross domestic product growth (GDP) rate might gain from lessons offered by the historical growth patterns of similar economies.
In this report, we look specifically at India and what types of pillars can be identified to drive the country’s growth over the next decade.
In order to achieve investment growth in the double digits and to create employment opportunities for its swelling labor force, India will need to industrialize further and target manufacturing as a share of GDP to rise to 25% by 2025 from its currently level of 18%. To do this, a new potential leading sector in manufacturing must be identified based on size, productivity, employability, and exportability. Our analysis identifies chemicals (including pharmaceuticals and petrochemicals) as a promising candidate to move up the value chain, as well as food processing, and textiles and apparel.
We estimate that total infrastructure in India spend could be around $3 trillion in the next 10 years bringing the infrastructure to GDP ratio up to 6.5-7%. Projects in physical infrastructure (power, ports, roads, rails, telecom), reforms in input markets (land and labor), focus on soft infrastructure, (healthcare reforms, education) and the harnessing of resources (oil and gas, coal, cement, iron, and steel) would all lead to higher productivity and growth rates.
Finally, exports as a productivity driver and employment creator could play a significant role in total factor productivity growth. If India can increase its exports to GDP ratio (including service exports) to at least 20% by 2021, India’s exports could reach ~$700 billion. The result of all of this growth would be higher per capita income, increasing urbanization, and a shift in consumer patterns as India moves up the ladder from a low-growth to a high-growth economy.
To read the full report click here.