According to a McKinsey report released on Wednesday India needs to maintain 8-8.5% annual growth to gainfully employ 60 million new workers who is likely to join the workforce by 2030. The report titled ‘India’s turning point’ – An economic agenda to spur growth and jobs’, said the economy would have to create 90 million new non-farm jobs by 2030 along with increasing productivity of the labour force by 7% to avoid a decade of low 5% annual growth.
According to the report 90 million figure accounted people seeking to shift from agriculture sector to other sectors for employement. ” compared to the need of creating 12 million jobs per year, currently India is creating 4 million jobs per year over the last 5-6 years. So this calls trpling of the annual jobs creation rate to keep unemployment in cheak,” said Gautam Kumra, MD, McKinsey India. The rate of economic growth was the function of both employment and productivity growth, according to the kumra and both would have to rise for India to achieve the high level of growth.
The report highlights the importance of construction and productivity in the area of economic growth, job and productivity. ” Manufacturing alone has the potential to deliver 20% of the increment in GDP that’s need to create 11 million job at the same time,” said the McKinsey Global Institute.
Similarly, the construction sector had the potential to create one in four of the non-farm jobs needed along with the improvement in productivity by application of modern techniques. “construction is actually the heavy lifter that will provide millions of job opportunities to workers moving out of agriculture. So this is 24 million job creation potential opportunity,” Madgavkar said.
Business would also have to scale up from midsize to achieve envisioned growth. According to the report, India had only 600 large companies with over $500 million in revenue. It called for 1000 mid-sized firm to scale up to large size firms and for 10,0000 small firms to climb up to midsize.
The most vibrant and dynamic part of the economy is ‘missing middle’ which spurred innovation and there was a need for easier financing and structural reforms to enable their growth, according to Madgavakar. the report estimates that in order to finance such high levels of growth India need $2.4 trillion of annual investment capital by 2030.
We need it in equity and euity-related risk capital type of instruments because that’s really what companies find challanging,” said Madgavkar.
The report suggest a range of reforms to deepen capital markets like addressing tax and regulatory barriers in the insurance and pension fund sectors. It also recommended creating a bad bank to take on the non-performing assets of the banking sectors.