Editorial of the Day (1st June): Journey to 2047

India aims to become a developed country by 2047, aligning with the 100th anniversary of Independence. This editorial discusses about the Journey to 2047 of India.

Table of Contents

Context

India aims to become a developed country by 2047, aligning with the 100th anniversary of Independence.
Currently, developed countries are classified by international financial organisations as having a per capita income of $13,845; this figure will be higher by 2047.
India’s current per capita income is $2,500.
To achieve this target, India needs an average annual real GDP growth rate of 6% to 7%, based on the projected exchange rate and domestic inflation rates.

Investment Needs and Fiscal Challenges

Incremental Capital Output Ratio (ICOR): Recent trends suggest an ICOR of 5, meaning that a 7% growth rate requires a real Gross Fixed Capital Formation (GFCF) rate of 35% of GDP, which India is close to achieving currently.
Capital Expenditures: The rise in the real GFCF rate has primarily been fueled by increased government capital expenditures, which may not be sustainable due to high fiscal deficits of 6.7%, 6.4%, and 5.9% in the post-COVID years.
Private Investment: There is a need for a one to two percentage point increase in private investment relative to GDP.

Strategic Focus Areas

Industrial Policy Redesign: Considering global shifts and the protectionist stance of some countries, India needs to adapt its strategies away from traditional export-led growth models.
Export Efficiency: Despite being efficient in service exports, India needs to improve its merchandise export capabilities, which remain essential for economic growth.
Sunrise Industries: Identifying and prioritising labour-intensive industries like food processing can support agriculture and meet export demands.
Import Substitution and Atmanirbhar Initiative: While pursuing self-sufficiency, especially in critical sectors like semiconductor manufacturing triggered by global supply disruptions, cost efficiency must be maintained.

Employment and Technological Integration

The integration of AI, Gen AI, and machine learning is reducing the labour intensity of economic outputs, leading to potential jobless growth.
A balanced mix of sectors, inclusive of technology absorption and skill development, is essential for job creation alongside growth.

Equity and Social Welfare

Poverty Reduction: India has made significant strides in reducing extreme poverty, now below 3% according to the World Poverty Clock.
Income and Consumption Inequality: While income inequality remains a concern, consumption inequality has marginally decreased.
Social Safety Nets: The importance of equitable growth is underscored by the need for robust social safety measures, including subsidised food supplies.
Health and Education: Investments in health and education are critical for sustainable growth and must be prioritised both in terms of funding and quality.

Conclusion

India’s path to becoming a developed country by 2047 involves multidimensional strategies that balance economic growth with technological integration, job creation, and equitable distribution of benefits. Enhancing private investment, focusing on strategic sectors, and maintaining fiscal health are pivotal for achieving these ambitious goals.