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Recently the World Bank released the so-called Systematic Country Diagnostic for India.
It is estimated that if the country grows at 8 per cent and above for the next three decades, the Indian economy will become one of the dominant ones by the middle of this century. The draft report looks at some of the key aspects that policymakers need to address to achieve its potential.
The report acknowledged that India has come a long way, as shown in Chart 1, in reducing poverty, thanks to relatively rapid economic growth. While it is true that India is likely to enjoy the benefits of abundant labour, as shown in Chart 2, for much longer than others, it is also true that per capita availability of natural resources is much poorer, as shown in Chart 3. As such, India needs to plot a far more resource-efficient growth path.
A big stumbling block in this regard would be the relative lack of inclusiveness in the economy. Till now, fast economic growth in India has also been rather unequal — both spatially and otherwise. Chart 4 shows one of the aspects in the form of a relatively low female labour force participation rate. Similarly, Chart 5 shows the comparatively massive concentration of wealth in the hands of the top 1 per cent.
Around the world, economic dynamism and the associated job creation are led by “gazelles” — young firms that grow rapidly in employment and productivity. India’s story is starkly different. Thanks to excessive regulation, Indian firms start small and stay small over time, as shown in Chart 6. This trend, as well as the security of a government job, explains why public sector jobs continue to enjoy a premium (Chart 7).
Lastly, the World Bank has highlighted the shoddy state of India’s statistical setup (Chart 8). Clearly, improvements in the economy must start by better mapping of data.
StatsGuru is a weekly feature. Every Monday, Business Standard guides you through the numbers you need to know to make sense of the headlines. Compiled by BS Research Bureau