India’s Future: The Quest for High and Stable Growth

Achieving high and sustainable growth has been elusive for India; success will require reaping the demographic dividend, boosting private investment and increasing competitiveness.

Published: August 3, 2023

By Paul Gruenwald, Ph.D., Dharmakirti Joshi, and Rajiv Biswas

The macro challenge for India in the upcoming decade is to turn traditionally uneven growth into a high and stable trend. Given structural differences with East Asian economies, India will need to follow its own unique path.

Capital accumulation will drive India’s economy toward this desirable path, with the government and, increasingly, the private sector investing in infrastructure and manufacturing. Digital infrastructure is another potential driver of high growth.

Success will ultimately depend on India’s ability to reap its demographic dividend; increase labor force participation, including upskilling; boost private investment, with structural reforms in land, logistics and labor; and increase competitiveness, driven by foreign direct investment. Geopolitics could provide considerable tailwinds.

India has come out of the pandemic reasonably well, with GDP growth of 7.2% in fiscal year 2023 (ended March 2023). Expansion may cool to 6% in fiscal 2024 due to a global slowdown and the lagged effect of policy rate hikes by the Reserve Bank of India, according to S&P Global. Even at this rate, India will be the fastest-growing economy in the G20.

The trillion-dollar question is whether India can sustain high growth. That is, can it replicate the performance of the East Asian tigers over recent decades and improve the prospects and opportunities for its large and growing workforce? Importantly, India’s economy is more domestically driven and services-orientated than the East Asian tigers, so its path to success will have to be different.