New Delhi: The Asian Development Bank (ADB) has asked India to develop a more vibrant and diverse manufacturing base, attract more foreign direct investment (FDI) and increase exports for moving on to a higher growth trajectory.
The country must restructure economy to create jobs and tackle other social issues to make the high growth more inclusive, ADB president Haruhiko Kuroda has said. Most of the indicators of education and health for the poor continue to show disturbing gender gaps, large rural-urban differences and wide variation across states.
“India needs to make major investments in education and health to begin to overcome these damaging disparities, and continue to invest in education and health,” he added.
India is trying to tackle its inequality challenge through the $39-billion (Rs1.72 lakh crore) Bharat Nirman programme to enhance rural infrastructure, which will help create farm and non-farm employment opportunities, Kuroda said. The labour market regulations have seriously affected employment growth and induced firms to funnel resources towards capital-intensive rather than labour-intensive sectors.
India’s manufacturing sector, which represents just over 16% of gross domestic product, also needs to grow rapidly to boost the overall growth rate, and to generate jobs. With depressed employment and wages, incentives for mechanization are limited, and productivity growth is constrained, the ADB president said.
Since lack of irrigation is a major problem, India has to manage its water resources much more effectively to further develop the rural sector. The country needs to develop suitable market institutions and stronger links between farmers and the consumers of farm products.“Overall, however, the manufacturing sector has not grown and in fact has shrunk by a small margin as a percentage of GDP since 1980,” Kuroda said.One of the barriers is also India’s lack of modern, reliable infrastructure. India’s economy desperately needs more and better roads, ports, railways and power supplies.Kuroda said, “India must restructure its economy to create jobs for its hundreds of millions of unemployed and underemployed people.”