India needs sustained 8% growth to go past China as global economy driver: Barclays

In order to oust China as the global economic driver, India requires to grow at around 8 percent annually for a sustainable period, Barclays Plc suggested in a note issued on October 10. For growing at this speed, the country needs investment in areas such as mining, utilities, storage and transport, it said.

The focus should be on sectors that have stronger spillover effects, that in turn expedite the growth of the broader economy, as per the UK-based multinational lender.

“Higher investment, especially in traditional sectors, should also have a positive impact on employment and household income, which is likely to be a key deliverable of the economic growth story pursued by policymakers,” stated the note written by Barclays' senior economist in Mumbai, Rahul Bajoria.

Also Read | Indian economy to grow at 6.5% real GDP for FY24: Finance Ministry

Highlighting the capacity constraints in traditional areas of investment, Bajoria said that these sectors require a higher degree of investment, including from the government.

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In the period between 2005-10, the Indian economy had grown at an average of around 8 percent. The rate could be matched again following the Lok Sabha elections next year if the government sets the target, Barclays had suggested in another report last month. However, the focus should also be on maintaining macroeconomic stability.

On the basis of the International Monetary Fund (IMF) figures, Barclays said that China's contributions would account for an estimated 26 percent of the global GDP in the five-year period leading up to 2028. In the same period, India's contribution would be around 16 percent if the domestic growth rate remains at an average of 6.1 percent, it added, further pointing out that the gap with China could be narrowed if the Indian economy starts growing at 8 percent.

Meanwhile, the IMF, in its World Economic Outlook (WEO) report released on October 10, raised the FY24 growth forecast for India from 6.1 percent to 6.3 percent. The upward revision reflects the “stronger-than-expected consumption during April-June”, it said.