To harness the full potential of its demographic dividend, the Indian economy must grow at 8-10% annually over the next decade, according to the latest Reserve Bank of India bulletin released on Tuesday.
In an article titled ‘State of the Economy', the RBI said conditions are shaping up for a sustained increase in real GDP growth, which has averaged over 8% between 2021 and 2024.
“In order to achieve its developmental aspirations over the next three decades, the Indian economy must grow at a rate of 8-10 per annum over the next decade to reap the demographic dividend that started accruing from 2018 and, as calculations show, will last till 2055,” RBI said in the bulletin.
The central bank also said that the developmental strategy over the next few decades must centre around extracting the maximum possible contribution of its young and rising labour force to the growth of GVA.
The bulletin further said the development strategy for the coming decades should focus on maximizing the contributions from its young workforce to the gross value added (GVA) growth.
“Raising employability – the set of skills that makes a person more likely to gain employment in a chosen occupation to benefit the person, the workforce, the community and the economy – with a focus on the formalisation of employment opportunities for the youth and women should continue to be the hallmark of the strategy,” it said.
RBI noted that the working-age population is set to expand at the rate of about 9.7 million per annum during 2021-31 and 4.2 million per annum during 2031-41.
RBI deputy governor Michael Patra recently said that India can achieve a growth rate of 10% in the next decade and become the second-largest economy by 2032 and the largest by 2050.
Patra also highlighted that India will enjoy a demographic dividend window of more than three decades, driven by a rising working age population rates and labour force participation rate.
The RBI bulletin also warned that extreme weather events and prolonged geopolitical tensions could lead to volatile crude oil prices and pose inflation risks.
“Food inflation, despite some signs of moderation, remains elevated and a potential source of risk to the disinflation trajectory," the bulletin said.
"Careful monitoring during the summer is warranted as overlapping food price shocks play out, before an above-normal southwest monsoon this year, as projected by the India Meteorological Department (IMD), enabling an easing of food price pressures. In the near term, however, extreme weather events may pose a risk to inflation along with prolonged geo-political tensions that could keep crude oil prices,” it said.
RBI’s monetary policy committee in its policy on 6 April kept police rates unchanged citing risks from volatile food prices. The central bank also retained the FY25 projections for real GDP at 7 % and consumer price-based inflation at 4.5%.
