Creating that many jobs will, in turn, require a strong boost to GDP growth, which will need to average between 8 and 8.5% every year from 2023 to 2030.
For India to enhance its productivity and competitiveness and to ensure growth and create job opportunity, McKinsey has prescribed for the country to undertake various reforms including privatisation of 30 or so of the largest state-owned enterprises to potentially double their productivity, framing off sector-specific pro-growth policies to attract investment in manufacturing, real estate, agriculture, healthcare and retail as well as creation of flexible labour markets for industry with better benefits and safety nets for workers.
In a report on India’s economy, “India’s turning point: An economic agenda to spur growth and jobs”, the McKinsey Global Institute (MGI) also suggested the need for India to unlock supply in land markets to reduce land costs by 20-25%, enable efficient power distribution to reduce commercial and industrial tariffs by 20-25%; and improve the ease and reduce the cost of doing business. MGI is the business and economics research arm of McKinsey.
“Financial system reforms will need to accompany these measures to generate the $2.4 trillion in capital we estimate will be needed in 2030. They include measures to channel more household savings to capital markets, to reduce the cost of credit intermediation, and to streamline government finance,” MGI said in the report released on Wednesday.
The consultancy firm says India needs to create at least 90 million jobs by 2030 as a new generation reaches working age, millions of workers move from farm work to better paid jobs in other sectors, and more women participate in the labour force. Creating that many jobs will, in turn, require a strong boost to GDP growth, which will need to average between 8 and 8.5% every year from 2023 to 2030.
“This is an ambitious goal, given the slowdown in the year leading up to the Covid-19 pandemic, and the extreme economic uncertainties posed by the crisis itself; yet, not taking steps to address the growth imperative now could mean a decade of stagnation, with low income growth and rising unemployment. The goal of getting India back on its high-growth track is possible if a set of reforms are put in place,” the report said.
While the central government’s pro-growth agenda is critical, roughly 60% of the reforms need action by the states, and active participation by the business sector. Businesses would need to develop a long-term value mindset and develop capabilities in automation and digitisation, product innovation, M&A, and corporate governance.
“With this, the coming decade for India could be one of high growth, gainful jobs, and broad-based prosperity. It is an opportunity not to be missed,” the report said.