Albert Park, Chief Economist at the Asian Development Bank (ADB), has outlined key challenges and opportunities for India's economic trajectory, particularly focusing on urban development and global competitiveness. In a recent interview, Park highlighted that India possesses sufficient drivers for economic growth, projecting a GDP growth of 6.6% for FY27 and 7.3% for FY28, despite global headwinds.
India's Urban Infrastructure Challenge
Urbanisation stands as a pivotal challenge for India's ambition to become a developed economy by 2047. Park noted that most economic growth and employment are concentrated in urban areas, making urban development synonymous with overall national progress. The ADB recently approved a $1 billion package to support urban reforms in India, underscoring the scale of the issue.
Addressing the need for integrated urban planning, Park pointed out that fragmented governance across ministries and between central and local governments can hinder private sector investment, which is vital for higher growth rates. Furthermore, cities must develop resilience against increasing climate shocks, such as flooding, requiring robust infrastructure and strategic planning.
Reforms for Global Competitiveness and Job Creation
To achieve its ambitious growth targets, India needs to continue reducing tariffs on intermediate inputs. This measure is crucial for enhancing the country's competitiveness in global value chains, boosting exports, and attracting foreign direct investment. Park also highlighted persistent constraints in factor markets, such as difficulties in acquiring land and raising finance, which particularly affect small firms and urban development projects.
Regarding job creation, Park stressed its direct link to economic growth. He noted that a significant portion of Indian employment remains informal, and formalisation is a key goal. Continued reforms in deregulation, skill matching, and improving access to finance and land markets are essential for generating productive jobs. Inter-state differences in business regulations also pose a challenge, requiring ongoing reform to facilitate easier movement and operation for businesses across states.
AI's Impact on Employment: Overblown Fears?
The rise of artificial intelligence (AI) has sparked global concerns about job displacement. However, Park believes these fears might be exaggerated, especially for developing economies like India. ADB research suggests that many tasks performed by workers in these countries are not as easily replaceable by AI as commonly discussed. He argued that AI is also a significant driver of productivity, potentially creating new opportunities alongside any displacement.
Global Economic Outlook and India's Resilience
While global factors like fuel prices, supply shocks, and geopolitical conflicts (such as in West Asia) pose risks, Park expressed optimism about India's economic resilience. The ADB downgraded its growth outlook for Asia Pacific to 4.9% for the current year, primarily due to these factors. However, India has demonstrated resilience, with the government actively protecting consumers and farmers from inflationary pressures. Park also acknowledged El Niño as a significant climate risk that could impact agriculture and the broader economy, but he remains confident in India's inherent growth drivers.