The Consumption Conundrum

CAN INDIA'S ECONOMY grow at an average annual rate of eight per cent? Most global financial institutions forecast India's longterm GDP growth at between 6.5 and 6.8 per cent. They could be mistaken.

- Minhaz Merchant

Several factors are beginning to coalesce which indicate an eight per cent annual growth rate is within reach, given the right policies and absence of new Black Swan events. Consider three key factors that can accelerate India's economic output over the next decade.

The first asset, of course, is demography. But India has to avoid the oft-cited trap of allowing its demographic dividend to dissipate into what cynics call a demographic disaster. A young workforce obviously does not guarantee higher economic output unless it has requisite skills. A significant number of Indian graduates are unemployable. Even amongst engineers, quality varies. The government recognises the problem and has made skill development a core agenda.

The National Skill Development Mission (NSDM), which works under the Ministry of Skill Development and Entrepreneurship, has a clear mission statement: "To rapidly scale up skill development efforts in India, by creating an end-to-end, outcome-focused implementation framework, which aligns demands of the employers for a well-trained skilled workforce with aspirations of Indian citizens for sustainable livelihoods."

The NSDM concedes: "India currently faces a severe shortage of well-trained, skilled workers. It is estimated that only 2.3 per cent of the workforce in India has undergone formal skill training as compared to 68 per cent in the UK, 75 per cent in Germany, 52 per cent in the US, 80 per cent in Japan and 96 per cent in South Korea. Large sections of the educated workforce have little or no job skills, making them largely unemployable. Therefore, India must focus on scaling up skill training efforts to meet the demands of employers and drive economic growth."