India needs to industrialise further and target 25 per cent of GDP pie for manufacturing sector by 2025 in order to achieve double-digit investment growth and create jobs for its swelling labour force, says a Citigroup report.
According to the report, increase in labour productivity, growth in investments and overall efficiency of production are the three primary drivers of GDP growth.
For Indian economy to achieve more than 8 per cent GDP growth, growth in investments needs to be at least 10 per cent, while labour productivity and overall efficiency of production should see growth at over 6 per cent and at 3 per cent respectively, it said.
Citing the importance of investment growth, the report said on an average, 1 per cent increase in infrastructure investment is associated with 1.2 per cent increase in GDP growth.
The report further said projects in physical infrastructure such as power, ports, roads, rails, telecom; reforms in input markets (land and labour); focus on soft infrastructure (healthcare reforms, education) and harnessing of resources (oil & gas, coal, cement, iron & steel) would all lead to higher productivity and growth rates.
"In the case of India, we estimate that total infrastructure spend could be around USD 3 trillion in the next 10 years bringing the infrastructure-to GDP ratio up to 6.5-7 per cent," the report noted.
Moreover, export as a productivity driver and employment creator could play a significant role in total factory productivity growth.
"If India can increase its exports-to GDP ratio (including service exports) to at least 20 per cent by 2021, India's exports could reach around USD 700 billion," it noted.
The report explores the different ways in which India will be able to increase investment growth, improve labour productivity, and also boost efficiency by undertaking structural and sectoral reforms.
"These drivers have the potential to sustain India's growth at above 8 per cent as the country benefits from the favourable initial condition of low per capita income," the Citi GPS: Global Perspectives & Solutions report said. PTI DRR DRR ADI ANU MR – 25021125 NNNN