India needs labour-intensive manufacturing, higher investment for 2047 goal

EAC-PM chief Mahendra Dev says India must raise investment, expand labour-intensive manufacturing, upgrade health and education and deepen state-level reforms to reach developed-economy status by 2047

India must raise its investment rate, push labour-intensive manufacturing, and fix basic health and education in order to become a developed economy by 2047, said Mahendra Dev, chairman, Economic Advisory Council (EAC) to the Prime Minister (PM) on Tuesday, cautioning that job creation will lag unless private capital spending and state-level reforms accelerate.

 

Speaking at the Business Standard Manthan Summit 2026, Dev said India’s per capita income will have to rise to about 18,000 dollars by 2047, which, in turn, requires real gross domestic product (GDP) growth of 7-8 per cent a year, supported by an investment rate of 34-35 per cent of GDP, up from the current 30-31 per cent, and sustained export growth. “The two major drivers are investment and exports,” he stressed.

 

 

Dev argued that no country has grown at 7-8 per cent without strong exports, noting that India’s share in world merchandise trade is still about 2 per cent, even as its share in global services exports has risen to around 4.3 per cent.

 

He identified three overarching development goals — achieving developed country-level per capita income by 2047, making growth genuinely inclusive through quality jobs rather than just redistribution, and meeting India’s net-zero emission target by 2070. Inclusion, he stressed, cannot be reduced to “tax the rich” debates and must instead focus on providing “quality employment” to the working-age population.

 

India lost almost four decades growing at about 3.5 per cent a year, effectively reducing per capita income growth to 1 per cent as the population grew at 2.5 per cent, Dev said.

 

“So, we lost two times. Since Independence, we followed the Mahalanobis model with largescale industries and we didn't have labour-intensive manufacturing. The second time we missed the reforms by almost 15-20 years. So, our per capita income is lower because of this,” he elaborated.

 

Dev said India has chronic underperformance in basic health and education, even as the country has built world-class institutions like IITs and IIMs.

 

He argued that the current reform agenda since 2014 is beginning to correct some of these distortions by shifting public spending decisively towards infrastructure and capital formation. This combination of higher public capex and consolidation, he said, is meant to crowd in private investment and lift productivity.

 

Dev, however, cautioned that the private sector is still not investing at the scale needed. Even as public capex rises, many Indian industrialists continue to cite uncertainty and demand concerns as reasons to hold back. “This may be the right time to invest private capital, because without that you can't achieve higher growth. Public capital expenditure can go to some extent, but we have to have private capital,” he argued.

 

He also stressed the need for state-level reforms. “India (is a) large country, implementation is done at the state level. So, we have to make sure that some of the reforms are implemented at the state level so that there is synergy,” he noted.

 

On manufacturing, Dev pushed back against the narrative of outright stagnation, pointing out that real value added in manufacturing has risen by about 35 per cent over the last 10 years, and employment in the sector has also grown.

 

The problem, he said, is that manufacturing’s share in GDP and employment has not increased because services have been expanding even faster. To generate mass employment, policy must deliberately nurture labour-intensive segments such as garments, leather, footwear, gems & jewellery, and marine products, backed by free trade agreements (FTAs) that give Indian firms better market access.

 

On agriculture, he argued that the traditional “production-centric” mindset in farm policy must give way to a full value-chain approach that emphasises post-harvest infrastructure in the form of warehousing, storage, logistics, and agro-processing. Integrating small and marginal farmers into farmer producer organisations (FPOs) and cooperatives, and ensuring they get access to inputs, technology, credit, and marketing support, is critical.

 

Dev pointed to survey evidence to argue that “the solution for agriculture lies in non-agriculture”. In his words, households increasingly “walk on two legs” — farm and non-farm — and farming alone will not deliver adequate incomes.

 

Skills, he said, are the indispensable bridge between these worlds. With India’s median age at around 28-29, compared with about 40 in the US and 50 in Japan, the country still has a 10-12 year “demographic dividend” window, but that advantage will dissipate unless education and skilling are upgraded “on a war footing”.

 

Dev was cautiously optimistic about the opportunities from artificial intelligence (AI) and digital technologies, citing estimates that they could add up to 1 percentage point to GDP growth and be deployed across sectors such as agriculture, health, and education. At the same time, he stressed that AI must be “AI for all” so as not to exacerbate inequality, and highlighted the emerging use of digital tools and even “drone didis” by self-help groups to deliver extension services to farmers in the field.

 

The EAC-PM chairman also underlined the need to deepen decentralisation and improve governance, particularly in health and education.

 

Dev argued that more fiscal and functional powers must flow to urban local bodies and panchayats, noting that local governments in countries like China control roughly half of public spending, compared to a mere 3 per cent in India. "We need to decentralise more, because states think decentralisation stops with them – they don't want to delegate to urban councils and panchayats," he stressed.