Mint Leadership Dialogue: Inclusive growth, skill development critical to India’s growth story

“Opportunity in India is second to none… How do you grab this opportunity? By focusing on ease of doing business, estimating the technical feasibility of a project, and creating opportunities to train labour,” said Niranjan Hiranandani, Founder & Chairman, Hiranandani Group at the Leadership Dialogues series titled ‘Realising India’s Economic Dividend: Distribution of opportunity’, organised by Mint in partnership with JSA Advocates & Solicitors.

The second part of the series that recently concluded in Mumbai focused on India’s manufacturing overdrive, the scope of financial innovation, infrastructure challenges, and the challenge of skilling and upskilling the workforce, among other things. The first discussion, held in Delhi, focused on agriculture and raising farmers’ incomes.

Hiranandani has a point. According to the World Bank’s latest India Development Update: India’s Trade Opportunities in a Changing Global Context, the country has been growing at a healthy pace despite challenging conditions. But greater openness to trade will be key to reaching its target of $1 trillion in merchandise exports by 2030.

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Setting new growth targets for India has been the trend for the past few years. From becoming a $30 trillion economy and Viksit Bharat by 2047 to becoming net zero by 2070, our goals have grabbed quite a few eyeballs. While India is well on the way to realising these objectives, the journey to Viksit Bharat (a developed nation) in our 100th year of independence will still take a lot of doing.

The fading China +1 opportunity, collapse of affordable housing, unemployment, and poor corporate dispute resolution have been deterrents to the India growth story. While India stands out globally for its financial innovation, the path ahead needs much more.

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How can this be done? How can we achieve our goal of a Viksit Bharat by 2047, considering India currently has a low GDP per capita of $2,393? After all, economic growth exists to benefit a country’s people, and while GDP size is important, high average income and its equitable spread are equally critical.

The fact is that India has to solve many problems before it can gear up to achieve the Viksit Bharat dream.

The Mumbai chapter saw some key points being made by the panellists about the biggest hindrances in the path of India’s growth story, the ways to overcome them and creating a risk-free environment for investors.

Reflecting upon what could be the Indian model of growth, one that is different from the US and China, the experts suggested it should be a hybrid of services and manufacturing. Any dreams of a Viksit Bharat were possible only if India increases its per capita income by five times and GDP by 8-10 times, they said.

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One of the key drivers had to be inclusive growth, which means how the hinterland is absorbed in the entire scheme of things. The dependence on agriculture, which just contributes about 17% of the GDP and yet employs 65% of the working population, needs a shift. Skilling the rural youth and ensuring they are employed could be a big benefit for the people, government, and the private sector.

“The extension of JAM (Jan Dhan Yojana, Aadhaar and mobile number) to JAMS, where ‘S’ is the skilling aspect, can give a starting point to those skilled labour to get absorbed faster in employment and also attract better wages. If we can provide specific training for labour in terms of levels and it is linked to JAM, it can benefit the entire ecosystem,” said Amit Kumar Sinha of Mahindra Lifespaces.

Building the required infrastructure to better connect interior parts with major cities, reducing logistics costs, and completing projects on time would be critical to India’s economic growth, the leaders said. The cost of logistics in India as a percentage of GDP is 13-14 % whereas in developed countries it is about 8%. The 6% that is spent extra on delays, inventory, storage, etc. needs to be fixed.

It takes more than 20 years on average for a project to be completed in India, pointed out Umesh Revankar of Shriram Finance. For example, the Delhi-Mumbai freight corridor had a closure date of 2019; even in 2024, the project is nowhere in sight. “So, between the planning and execution, so much time is lost that the project may not be sufficient anymore for the purpose it’s supposed to solve. We are always much behind where we want to be,” said Revankar.

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Capital, though not short, needs to be carefully directed towards infrastructure and creating employment opportunities, the experts said. Pension funds, which are ₹40 trillion in size, and insurance funds, which are ₹50 trillion, can be utilised in infrastructure. Foreign direct investment (FDI) in India has continued to grow and because of the political stability and markets, attracting capital isn’t an issue.

Domestically also, the SIP (systematic investment plan) phenomenon has helped people with investment options in stock markets through mutual funds. But capital has to find a return that has minimum risk. “Also, India can’t grow if the capital continues to flow into few states and cities. It has to go to UP, Bihar, Odisha—it needs significant involvement of grassroots development, whether it’s law and order, infrastructure, or skill development,” said Abhishek Poddar of Macquarie Group.

Corporate dispute resolution

Another important aspect that sometimes keeps foreign investors at bay is corporate dispute resolution. It has earned a bad name for India and is very critical for ease of doing business and attracting capital. There aren’t technology-savvy judges to man the docket, according to Venkatesh Raman Prasad of JSA Advocates & Solicitors. It takes a lot of time to explain what an economic project means.

“This has happened with telecom, roads, and aviation. There has to be some serious capacity building at different layers of our institution. Otherwise, how does an investor calculate his risk appetite and put a dollar number to that?” said Prasad.

One fundamental change that needs to happen in India is in the mindset, said Kapil Modi of Carlyle. Like China, we need to think of any investment opportunity as a global opportunity—like they did with solar and semiconductors and are today ruling the industry globally. They don’t think about the incremental domestic opportunity because it doesn’t give them scale.

With a favourable demographic dividend, an English-speaking population, and educated urban youth, India needs to focus on R&D. Many times, the youth move abroad for want of such opportunities. If an ecosystem is created here that gives students opportunities for R&D, many of the next generations will stay in India.

“There is the VC ecosystem that can take the risks, but we are taking the risk on copycats, what worked in the US that we are trying to replicate in India. We need to think of what will work in India. Only then can growth truly happen,” said Modi.

India is a land of entrepreneurs. For them to succeed, they need stable policies, proactive government, and backing of capital and debt markets to contribute to India’s growth story. In the end, it’s about vision and solving the real issues.