Ahead of the Interim Budget, the Finance Ministry laid out four key challenges facing India’s economy in the “The Indian Economy: A Review” Report. This comes as India aims to become a $7 trillion economy by 2030 over the next 6–7 years.
The report notes that while domestic performance drives growth, global spillovers are also crucial given increasing globalization. Slowing hyper-globalisation and friend-shoring trends will impact trade and growth.
AI and Services Sector
The advent of artificial intelligence poses a major threat to services sector jobs. This is critical for India, as the services sector accounts for over 50% of GDP currently.
With AI adoption growing globally, automation could displace various service jobs. Retraining and skilling the workforce is essential to transitioning towards new AI-enabled roles.
Energy security vs. sustainability
Balancing energy security and economic growth versus transitioning to renewables is another multifaceted challenge highlighted.
Under climate commitments, India aims to fully shift to renewables by 2070. However, the energy needs of a growing economy also need addressing. This trade-off involves geopolitical, fiscal, technological, and social dimensions.
Availability of a Skilled Workforce
Having a healthy, talented, and appropriately skilled workforce available to industry is also key to economic growth.
Ensuring age-appropriate learning outcomes at all levels and a fit population who can undertake productive economic roles are policy priorities. Healthcare and education reforms are thus interlinked with growth.
Positive Growth Trajectory
Despite the challenges, the ministry forecasts 7% or higher GDP growth in 2023–24 and potentially in 2024–25 too. This would mark four straight years of over 7% post-pandemic growth.
Sustaining high growth rates over the next decade is crucial for the $7 trillion economy’s vision. But it requires systematically addressing the structural economic challenges highlighted.