Page 8 - CII ARTHA India’s Growth Prospects

Focus Story

By leveraging technology to cent in the case of women objectives and societal needs. density per sq. km. is the economic and financial the coming years at a weaker system to address these on growth and recently
augment labour productivity and from 18.9 per cent to Lastly, and it cannot be put in highest in G20. For instance, Growth Prospects inclusion and holds important pace than the average for the challenges, together with imposed trade frictions, such
and efficiency, India can 22.9 per cent in men. any other way, business renewable energy projects promises for productivity two decades before the renewed skilling efforts. India’s as export restrictions on
unlock new growth More than a third of women models that are built on will need a lot more of scarce gains across all sectors of the COVID-19 pandemic. success at exporting services wheat and rice and the
opportunities while in Kerala, A&N Islands, Andhra encouraging consumption of land resources than other economy. Moreover, the Geoeconomic fragmentation demonstrates the significant Import Management System
preserving employment. Pradesh, Goa, Sikkim, Manipur, unhealthy foods hit at the non-fossil fuel alternatives. of Indian government’s infrastructure is on the rise with tensions payoffs of quality education. for IT equipment such as
Short-term profit Delhi, Tamil Nadu, Puducherry, very foundation of India’s Businesses in the financial investment push is upgrading escalating in the form of trade Building on this, and focusing laptops, tablets, and personal
maximisation can come in the Punjab, Chandigarh and future growth. sector are right to bat for less logistics, providing a strong restrictions and other on industry-centric and computers, could be
forward-looking skilling
counterproductive in the
inward-looking policies. The
basis for private sector
way of long-term financial Lakshadweep (34-46 per onerous and cumbersome investment and growth. But wars in Ukraine and the programs can help ensure medium to long run.
viability of businesses if it cent) are overweight or Third, the private sector rules that make operations Economy in a perhaps India’s most Middle East are examples of workers have the right skills Unwinding trade restrictions
comes in the way of aggregate obese. should take the lead in difficult. At the time, significant potential resides in geopolitical risks materializing, to succeed in the job market. and removing tariff and
demand growth. Demand fostering a culture of businesses should recognise its young and growing threatening global trade and And in this context, the non-tariff barriers would
arises from people’s incomes innovation and their own interest in financial population, which could commodities markets. And private sector has a crucial increase integration into
which, in turn, depends on INVESTING IN YOUTH entrepreneurship. This is stability. Therefore, businesses Growth- potentially add about 10 that is not even taking into role to play as a partner global value chains, boost
their employment prospect. If OF INDIA THROUGH crucial for driving must make a distinction million people annually to the account the major challenges involved in the development productivity, help create more
employment shrinks, income SKILLING, VOCATIONAL technological advancements between rules that make it labor force by 2050. Should that climate change is likely to and implementation of those jobs, and boost overall growth
shrinks, demand slows and TRAINING IS CRITICAL and creating new employment uneasy for average Indians to these numbers translate into present for India and the skilling programs. in India. At the same time,
both sales and profitability FOR BUILDING A MORE opportunities. As per the transact and rules that Challenged World sustained increases in region over the coming Streamlining labor and food security concerns would
will decline. Just as robots SOPHISTICATED World Bank, India’s spending safeguard or enhance productive employment (if far decades. business regulations would be better addressed by
were mentioned as unlikely to ECONOMY on research and development systemic stability. There is a reaching reforms continue, as help remove obstacles to agricultural reforms to
buy the cars that automation is 0.65 per cent of GDP in case for the former set of noted below), India’s To navigate this complex private-sector growth. Four enhance market functioning
would produce efficiently, 2021, far from Israel’s 5.56 rules to be eased but not for economic and human environment, India must leap new labor codes were by allowing price signals to
‘artificial intelligence’ These are worrying and China’s 2.43 per cent. By the latter. development would forward in its development recently passed by Parliament convey the right incentives to
computers will not buy the developments and need more allocating resources towards significantly accelerate. journey with an ambitious between 2019 and 2020, to market participants.
products that corporate India than just the Government’s the development of In the long-run, there is no T he global economy is challenges such as climate reform agenda that boosts consolidate, modernize, and
will produce. intervention. Timely and cutting-edge technologies, trade-off between the showing resilience, but change can hardly be Countries that have seen growth and creates good jobs. streamline regulations on Advancing this structural
innovative interventions are product innovation, and commercial interests of challenges remain significant. addressed in a fragmented rapid gains in economic The development of physical wages, industrial relations, reform agenda can boost
The second role the private needed for India to combat market expansion, companies businesses and public interest. Growth in the world’s major world. Greater multilateral G20 presidency in 2023 paved account deficit remains development in recent and human capital should social security, and India’s growth and help
decades have generally
both be at the center of this
occupational safety, health,
harness its demographic
4
sector will have to play is in the obesity epidemic . The can enhance their Both converge. Failure to economies has surprised on cooperation is a precondition the way for progress on comfortably within historical benefited from integration in agenda, complemented by and working conditions. dividends. The promise of a
harnessing India’s private sector could play a competitiveness while incorporate this truth in their the upside in the second half for global prosperity, and global issues, particularly in norms and its financing does global markets. Access to ensuring that those resources Importantly, the new codes prosperous development path
demographic dividend. India’s pivotal role in this regard, not contributing to national business models will mean of 2023. Moreover, a soft champions to advocate for advancing multilateral not appear problematic. Not Western European markets are put to their best use. To introduce significant is within reach if the reforms
young and growing population only through corporate social development objectives. that India remains a country landing this year appears such cooperation are needed. cooperation on debt only is the external sector (and financing) helped Eastern that end, India can better provisions that alleviate are enacted. Now is the time
presents an opportunity for responsibility (CSR) initiatives with potential forever. If increasingly within reach as resolution in heavily indebted position robust, but also European countries grow expand its potential by constraints discouraging firm to act.
sustained economic but also as a core business Fourth, private sector must businesses internalise this inflation has been declining INDIA EXPECTED TO countries. banks and corporates balance rapidly following the collapse bolstering education, growth and formal job

without significant output
expansion. However, we have imperative. From setting up keep in mind that choices truth, then Amrit Kaal is here. costs in many parts of the CONTRIBUTE ABOUT sheets are looking their of the Soviet Union. The East streamlining labor and creation. Accelerating their
a rather short window of health and fitness start-ups to inevitably involve trade-offs. It world. However, neither 16 PER CENT TO Amid a challenging strongest in several years. In Asian tigers’ economic business regulation, and implementation would make

opportunity to harness this corporates incentivising their is natural to follow global growth nor interest GLOBAL GROWTH environment, India has indeed other words, India is enjoying take-off was facilitated by removing trade barriers. labor markets more flexible
through strategic investments employees to stay active and international cues. But, India rates are expected to return THIS YEAR achieved a strong a period of relative deepening economic links while protecting workers.
in education, skill fit to other such has its unique advantages and to their pre-pandemic levels. macroeconomic performance, macroeconomic and financial with the rest of Asia and the Efforts to remove
development, healthcare, and interventions, the private features that must be kept in Financing costs for India is emerging as an helped by prudent policies stability, notwithstanding the global economy. China, whose bureaucratic inefficiencies and
fitness to propel India's sector has a unique mind. In the first half of this governments, households, and important player in that and reforms. Growth in the global challenges and risks. level of development was improve the business climate
two post-pandemic years
growth trajectory further. opportunity to contribute to century, geopolitical and businesses are thus likely to respect. With its increasingly (that is, FY2021/22 and Looking forward, India has comparable to India’s in terms can be supported by India’s

India’s demographic dividend India's economic resilience. security considerations will remain elevated at times of significant role in the world FY2022/23) has been robust, great potential to grow and of GDP per capita as recently world-class digital public
will peak around 2041, when Moreover, investing in the have to be borne in mind. already high public and private economy, it is expected to averaging 8.1 per cent. develop over the coming as the early 1990s, has grown infrastructure. For example,
the share of the working-age youth of India through skilling Business models that rely debt, a significant vulnerability. contribute about Inflation which rose to 6.7 decades. Recent rapidly since then, having the new Udyam Portal
population, i.e, 20-59 years, is initiatives, vocational training significantly on resources 16 per cent per cent during 2022/23 reforms have taken steps to unleash the offered by the country’s
manufacturing sector to
Ministry of Micro, Small, and
expected to hit 58.9 per programs, and healthcare from abroad – financial, Escalation of regional conflicts to global appears on a firmly bolstered this generate export-led growth. Strengthening education Medium Enterprises
cent . Ensuring that the interventions is a win-win for technological and material – and geoeconomic growth declining path. After rising potential. India’s (particularly at the primary streamlines business
3
working-age population is the private sector, as this will may be riskier than before. fragmentation are also threats this year. to 12.9 per cent of GDP world-class However, India is set to and secondary levels) and registration for some of the
both mentally and physically help in building a more These risks will be to the global economy. Moreover, in FY2020/21, the general digital public encounter a more complex skilling can help address country’s most important job
fit will be essential to realise sophisticated economy. compounded in the areas of Research by the IMF has its government overall deficit infrastructure, for global landscape along its India’s skill shortages and creators.

the nation's full economic Companies can integrate energy security and energy shown that fragmentation successful is being brought down, albeit example, is growth path forward, mismatches. Workers in
potential. As per NHFS, youth empowerment into transition. Businesses must could impose significant costs, gradually. The current fostering compared to the favorable general have fewer years of Trade could help ensure
up to 7 per cent of global
obesity has increased their core business mission by also keep in mind that India is GDP (IMF, 2023a). conditions that facilitated the formal education than resources are put to their
between 2015-16 to 2019-21, aligning talent development a land-scarce country for its Moreover, global prosperity of other Asian desirable (IMF, 2023b), and best use in the economy,
from 20.6 per cent to 24 per strategies with organisational population. Its population economies in recent decades. education quality remains low reducing misallocation and
Cristian Alonso Nada Choueiri 1 Global growth is slowing (ASER, 2023). The 2020 inefficiencies. In that sense, by
Economist, International Monetary Fund Assistant Director, International Monetary Fund
3 Economic Survey 2018-19, Volume 1, Chapter 7: India's Demography at 2040 down, with the global National Education Policy limiting competition,
4 WHO recognises obesity as a global epidemic: https://www.who.int/activities/controlling-the-global-obesity-epidemic 1 The views expressed in this article are those of the authors and do not necessarily represent the views of the IMF, its Executive Board, or IMF management. economy expected to grow in aims to revamp the education protectionism can be a drag
08 ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY 09
QUARTERLY JOURNAL OF ECONOMICS
QUARTERLY JOURNAL OF ECONOMICS
FEBRUARY 2024 FEBRUARY 2024

according to Niti Aayog and are hesitant to under Article 6 of the Paris consider implementing a
RMI. The move encourages finance/refinance large-scale Agreement. It will help nationwide policy mandating
manufacturers and project green hydrogen projects. create a marketplace for the use of Green M15 fuel i.e.
developers to invest in green • The production cost of Indian green fuels like green mixing 15 per cent green
hydrogen and its derivatives various green fuel hydrogen and its methanol with petrol, in
like green ammonia and technologies, such as green derivatives, green methanol, transportation and other
methanol, putting India among hydrogen and its and SAF, among others, in applicable sectors, supported
those leading countries, such derivatives, is higher. the international market. by incentives for producers
as the United States and the However, grey hydrogen, • There’s a need for speeding and consumers to adopt this
European Union, which have alongside various grey up strategic interventions fuel. This could be a pivotal
allocated public funding for manufacturing methods, has for the Green Hydrogen step in India's journey
green hydrogen. towards a greener and more
historically benefited from Transition Program by
subsidies. Without a robust offering incentives for both sustainable future.
Establishing a market for green and liquid global carbon green hydrogen production • To ensure widespread
ammonia and methanol is a market, pricing the value of and electrolyser availability of Green M15 fuel,
global issue. In India, carbon and embedded manufacturing. These there’s a need for investment
forward-thinking standards by emissions in the production initiatives will catalyze in the necessary
the Bureau of Indian Standards, and usage of grey hydrogen industry growth. infrastructure for its
such as blending DME with becomes challenging. This is production, distribution, and
LPG and methanol with diesel, why, initially, green • The cost of renewable storage.
are significant steps towards hydrogen seems more energy can be further
integrating green fuels. reduced through energy • Campaigns should be
expensive than grey surplus banking provisions, launched to educate the
hydrogen.
especially for sectors public and other stakeholders
• The cost of funding remains mandated to use green about the benefits of using
a persistent bottleneck, hydrogen. Green M15 fuel and address
presenting a considerable • The government should misconceptions.
challenge for project implement targeted
developers, impacting the incentives to boost the By adopting these
optimization of capital export of green molecules. recommendations, India can
expenditure and project It will help establish India as make significant strides towards
execution. energy self-reliance,
a global leader in environmental sustainability, and
renewable energy.
Suggestions • A mechanism should be economic growth.

developed to facilitate Conclusion
Challenges To address the challenges, we low-cost financing and
provide benefits like
suggest that the government
take several steps to provide a accelerated depreciation This is the time to take
Despite government efforts much-needed boost to the for green hydrogen immediate action to overcome
to promote green hydrogen industry, such as: infrastructure investments. all the bottlenecks on the road
and its derivatives, the sector • The government should towards leading the global
is still in its infancy, and • As in the initial days of expand the FAME India transition to sustainable energy.
acknowledging and addressing renewable energy, the (Faster Adoption and With right policies in place and
the hurdles that impede our government mandated its Manufacturing of (Hybrid the development of a market for
full potential in this critical usage through Renewable &) Electric Vehicles in India) green methanol and ammonia,
sector is essential. Among the Purchase Obligation (RPO). Scheme to include green India can unlock the full
various challenges are - potential of green hydrogen and
Similarly, we suggest that a methanol vehicles in it. It its derivatives. Moreover, it will
• There isn’t much existing quota should be mandated will not only boost the provide a much-needed boost
demand and a developed for the use of green market but also provide for the production, distribution,
market ecosystem for hydrogen in sectors like support to the green and usage of green hydrogen and
green hydrogen and its fertilizers, chemicals, steel, hydrogen ecosystem in the its derivatives across sectors.
derivatives like green and power generation. country. Such initiatives will not only help
ammonia and methanol, not Creating demand through • There’s a need for funding India in achieving targeted
only in India but also policy will spur sectoral and support for research climate goals but also position it
globally, compared to other growth and reduce the and development in the as a leader in the green energy
conventional fuels. production cost of green areas of green hydrogen revolution.
hydrogen.
• Project developers face and methanol-based
difficulty in getting final • Leveraging its international technologies. It will further
offtake agreements signed. relations, the government help enhance efficiency and
should expedite the signing reduce costs.
• In the absence of advance
offtake contracts, lenders of bilateral agreements • The government should