IMF released a Working Paper titled ‘Advancing India’s Structural Transformation and Catch-up to the Technology Frontier’ which takes stock of India’s growth and suggests structural reforms that can help accelerate growth in India.
Key highlights of the Paper
- Sectoral imbalances: Role of agriculture in terms of aggregate output has declined in India from over 40% in 1980 to 15% in 2019 still accounting for 42% of employment due to factors like strict labor market regulations.
- Uneven tech-adoption by industries: Services outperformed manufacturing in catch-up to technological frontier with computer programming, other IT services, and jewellery manufacturing being string performers.
- Future estimates: India needs to create at least between 143-324 million jobs for its growing population by 2050.
- Even a relatively small shift of employment away from agriculture and into construction, services, or manufacturing can boost GDP growth by 0.2-0.5%.
Key Recommendations
- Advance labor market reforms: Center to work with States to enhance labor market flexibility while still providing adequate protection for workers.
- Foster trade integration: Remove tariff and non-tariff import and export restrictions to subject Indian producers to healthy competition and provide for better allocation of resources.
- Strengthen social safety net: To facilitate migration of workers from rural to urban areas and aid in structural transformation of the economy.