How India can become a $10 trillion economy by 2034
A new PwC report suggests that now is the time for India to comprehensively reinvent its economy in line with long-term needs and ambitions. All that’s required is a “full-potential mindset.”
For all its devastating consequences, the Covid-19 crisis has been a unifying experience for people across the world. Lockdown, virtual working, social distancing and uncertainty have been a reality for everyone – irrespective of city, country, socio-economic background or any other social segmentation.
According to PwC, a shared experience of this scale is a rare occurrence and presents an equally rare opportunity. In its report, the Big Four accounting and advisory firm details how the crisis could usher in a ‘full-potential mindset’ – “A perspective that is experienced together by different stakeholders, creating a common vision driving higher outcomes for all.”
India is at a crossroads. On the one hand, the country has long been touted as a centre for economic growth. On the other, the diligent democratic system combined with the size and scale of the economy has meant that progress is always slow going. According to PwC, leveraging the full potential mindset that has emerged since the start of this year could make India’s economy lean, agile, decisive and consequently “more productive than ever before.”
Currently valued at under $3 trillion and growing at just short of 7% per year, India has long aspired to grow into a $5 trillion economy, which is expected to take decades. According to PwC, a full-potential mindset could take India to 9% growth and $10 trillion in cumulative economic activity by as early as 2034.
The timeline is such: For now, efforts must be directed towards containing the virus and subsequently repairing the economy. It is only in the medium term – between one and three years from now – that India should start fundamentally rethinking and reconfiguring its economy in line with conditions of the future. By 2023, the researchers expect that India will be on-track to reaching its full potential over the next decade and more.
Indeed, rethinking and reconfiguring is a vague yet monumental undertaking. PwC analysts broke this entire process down into eight key pillars, which constitute the ‘house of revival and growth.’ To reinvent the demand landscape, for instance, the two pillars are widespread engagement with society and investing in economic stimulus, infrastructure and decentralisation.
From a resources perspective, one pillar is the accumulation of natural, financial and data capital, while the other is the development of human and cultural capital to meet modern day digital requirements. Reinventing supply involves rethinking operating models with a focus on agility and flexibility as one central pillar, the other being rearranging supply chains to minimise risk and maximise value.
The last two pillars fall within the institutional paradigm. Reforms & governance will help drive many of these fundamental changes. Institutional forces will also have to be deployed to ensure business sustainability – a central part of the global economy of tomorrow. According to PwC, these eight pillars together could eliminate key barriers to economic growth.
“As we reconstruct our economy, it is imperative that we remove frictions that have hampered growth historically,” said Shashank Tripathi, Government Strategy & Transformation Leader at PwC. He went on to add that these pillars will have to cut across the entire economic landscape.
“While each sector must grow on its own, increasing flow of data and convergence between sectors and across institutions will be key,” he said. PwC’s report lays down nine key sectors where reinvention efforts must be concentrated for the highest impact.
Sectors in focus
Facing similar imperatives for reinvention are the consumer retail, health & pharma, and the automotive & industrial products sectors. Most changes here lie on the demand side, as consumer preferences changing to become more safety and health conscious, while the spending consumer base is rapidly expanding beyond the traditional urban centres. Engaging various population segments will be key to growth for these sectors. At the same time, these industries are also expected to face change on the supply side, from digitalisation of operating models and supply chains.
Clubbed together in a separate category are the power & mining, infrastructure & logistics, information technology and education sectors. Each of these sectors can benefit from a bigger emphasis on data platforms to generate insights and better manage infrastructure. Drawing private investment will be key to achieving these objectives. Interestingly, PwC suggests that India’s budding IT sector also has an opportunity to capitalise on an expanding urban landscape, by developing solutions in vernacular languages for instance.
The financial sector and the government sector could both do with some reforms according to PwC. Non-performing assets are on the rise in India, calling for an effective bankruptcy framework. The government, meanwhile, needs to improve the ease of doing business in India through a range of land, labour, and taxation reforms. Lastly, the agriculture sector needs support with its liberalisation drive, as farmers look to build competitiveness and livelihoods.
The researchers also make note of the small and medium enterprises (SMEs) segment in India, which needs attention in its own way. Most SMEs remain outside of the organised business fore, and need to be brought into the economic system. Combined with reforms in individual sectors, this would help instill the full potential mindset in India. “Adopting a whole-of-society execution, bringing together the public and private sector along with citizens, would be key to spur faster revival and growth,” concluded Shyamal Mukherjee, Chairman at PwC India.
