Professor S. Mahendra Dev, Chairman of the Economic Advisory Council to the Prime Minister, has stated that India's economy is poised to achieve 7% growth by the 2026-27 fiscal year, despite prevailing global economic shocks. Speaking at the Business Today India@100 Summit, Dev highlighted the nation's resilience in the face of challenges such as US trade tariffs, geopolitical conflicts in West Asia, and the impact of El Niño on monsoons.
Economic Resilience and Future Outlook
Dev pointed to India's recent performance, noting that the economy grew by 7.7% last year, exceeding many market economists' predictions of growth below 6%. He expressed optimism for the current fiscal year, suggesting that while the Reserve Bank of India projected 6.7%, India could still achieve 7% growth.
Crucial factors to monitor include the evolving situation in West Asia and the trajectory of crude oil prices, which have recently hovered around $93 a barrel. A potential drop in oil prices, Dev suggested, could further accelerate India's growth trajectory.
Driving Growth: Investment, Exports, and Manufacturing
To sustain and accelerate this growth, Professor Dev outlined several key areas of focus. He stressed the necessity of increasing the national investment rate to 25% and significantly scaling up exports. Manufacturing is identified as a pivotal sector in this strategy, having already demonstrated robust growth with its Gross Value Added (GVA) increasing by over 10% in the last three years.
Contrary to common perceptions, Dev affirmed that India's global share has expanded from 1.8% to 3.2%, indicating a growing presence in the international economic landscape. He also noted that manufacturing and services are complementary, with growth in one stimulating the other.
Addressing Employment and Reforms
Regarding the impact of artificial intelligence on jobs, Dev maintained a positive outlook, predicting a net positive effect on employment. However, he emphasized that the private sector must undertake the primary responsibility for job creation, as government initiatives account for only about 10% of new positions.
To foster private sector investment and job growth, Dev called for significant reforms at the state level, particularly concerning land and legal frameworks. He highlighted that lengthy dispute resolution processes deter investment and suggested forming a committee of judiciary and economists to streamline these issues.
Skilling the Workforce and Bridging Gaps
A critical component for India's economic advancement is scaling up workforce skilling initiatives. Dev identified a significant gap between the talent produced by educational institutions and the actual demands of the industry. He advocated for enhanced interaction and collaboration among industry, academia, and government to bridge this skill deficit.
Dev also discussed India's "missing-middle" problem in manufacturing, where there's a prevalence of either very small or very large enterprises, but a scarcity of medium-sized factories (e.g., 200-500 workers) seen in countries like China and Vietnam. He expressed hope that targeted land and labor reforms would enable companies to expand their scale over time, further solidifying India's manufacturing base.