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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
 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
 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:  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
                                                                                           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
 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.
 •  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
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