Opinion
Revive public-private partnerships in infra to boost GDP growth
Summary
- The pace of India’s economic growth has held up above 7% despite the last quarter’s dip, but let rhetoric not crowd out reality. There’s still a lot to be done to lift the economy’s trajectory. Among other must-dos, a revival of public-private partnerships should be a policy priority.
India’s economic growth remains strong, with the share of gross fixed capital formation in GDP above 31%, which is good news for the ongoing recovery. That said, policymakers and commentators would do well to stop crowing over India still being the world’s fastest growing major economy.
The US, with a GDP of $27.4 trillion, grew at 2.8% in the April-June quarter, adding $766 billion to global output. China grew at 4.7%, adding some $841 billion to that pie. India’s 6.7% growth in the quarter from April to June added $254.5 billion.
If we set aside delusions of grandeur over the economy’s pace of expansion, we could also note, realistically, that the slowdown from 8.1% clocked in the corresponding quarter a year ago is deceptive.
Over the two years from the first quarter of 2022-23 to the same period this fiscal year, India’s compound growth rate has been 7.4%, distinctly superior to last quarter’s 6.7% increase from a year ago.
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That said, at this stage, we should be aspiring for sustained double-digit growth. The 2018-19 Economic Survey had expected India’s demographic dividend to start petering out after 2041.
Over 2031-41, the share of people in the working age group of 20-59 would be almost 59% of the population, and that proportion would begin to fall thereafter.
We must adopt policies to maximize the labour force participation rate of these age cohorts, find jobs for those willing to work and also raise productivity per worker, so as to maximize overall output and the growth rate.
The 0-19 age bracket, the most capable of being life-long learners, has been shrinking: it was 41% of the headcount in 2011 and is slated to be just a quarter of the total in 2041. Nurturing a vibrant, creative workforce has to begin with good nutrition and sustained mental stimulation during the most critical first three years of life.
It must be followed through with high-quality education that helps children master the fundamentals, rather than acquire only a partial grasp of these, leaving them weak on concepts that build on those basics.
If we nurture the faculty of critical thinking among school kids, their productivity at work would depend on infrastructure and the availability of technology that can raise output per head. This calls for lots of investment. And that money must come primarily from the private sector.
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Right now, the Centre is spending heavily in the hope of ‘crowding in’ private investment. New kinds of startups are coming up that will help us indigenize defence production, expand the space sector, enhance communications and more.
However, divisive politics in some parts of the country could potentially disrupt social cohesion, normal life and economic progress. This must be kept in check.
To secure India’s growth trajectory and aim higher, we must meet the challenge of building infrastructure that spans energy, transport, logistical networks and digital enablers, for which it is vital that the government revive public-private-partnership models to absorb private capital in the country’s infra build-up.
A key requirement in this regard is creating a vibrant market for corporate bonds, so that long-gestation infrastructure projects do not use up scarce bank credit or result in bad loans that stifle further lending.
Simultaneously, we need intelligent climate technology to remove carbon from the air, not just reduce the pace of fresh emissions. In all, we will have to count on innovation in multiple domains. There is much to be done beyond gloating over India’s status as the fastest growing large economy.
