Michael Debabrata Patra, Deputy Governor of Reserve Bank of India noted in a latest speech that India's growth trend is on the cusp of a post-pandemic upshift, with early signs of it rising above 7 per cent recorded during the 2000s before COVID-19 struck. While private consumption typically accounts for about 60 per cent of India's GDP, it is investment and exports that provide the turning points. In the period 2021-24, the export lever has been muted by global headwinds, but public expenditure on infrastructure is taking over as the locomotive of the step-up in the growth trend. Recent surveys indicate that private investment is getting crowded in.
He stated that India's recent growth performance has surprised many, triggering a flurry of upgrades. The International Monetary Fund (IMF) has cumulatively revised its forecast for 2023 upwards by 80 basis points between April 2023 and January 2024. In purchasing power parity (PPP) terms the Indian economy is already the third largest in the world. According to the OECD's December 2023 update, India will overtake the US by 2045 in PPP terms to become the world's second largest economy. This underlying strength will also be reflected in the PPP value of the Indian rupee (INR).
India has emerged from the pandemic scarred but resilient and poised to make a tryst with its developmental ambitions by riding the thermals that these opportunities are generating. Take-off will have to contend with the headwinds posed by several challenges, Patra noted. He opined that reaping the demographic dividend hinges around expanding the contribution of the workforce to GDP growth. Currently, the contribution of labour to value added in India compares poorly in a cross-country perspective - in terms of appropriate skills for a specific job, only 51 per cent is employable, highlighting the criticality of the upskilling missions that are underway such as Skill India that aims to bridge the skill gap and enhance employability.
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