As per the growth projections by the International Monetary Fund (IMF), India, by 2022, will be the world’s fourth-largest economy overtaking Germany and pushing out Britain from the top five. But according to a report in Livemint, Anirban Nag points out that the challenges the South Asian nation must surmount to get there are many.
According to government data, bad loans, restructured debt and advances to companies have risen to about 16.6 per cent of total loans. That spike in bad loans has forced banks to focus on recovering bad debts. Nag points out that this has resulted in low records in loan growths, which will prove to be a challenge for the Prime Minister who is seeking to revive investment and boost employment.
Apart from slowing investment, India’s labour productivity has been weakening, limiting growth and employment opportunities.
Labour productivity per person employed eased from 10 per cent in 2010 to 4.8 per cent in 2016 as reforms sputtered. According to the International Labour Organisation, output per worker is projected at $3,962 for India in 2017, a fraction of Germany’s $83,385.
Despite the issues Nag points out the potential remains. Ranking countries and regions on their gross domestic product, for 2017 and 2022 based on IMF forecasts, India, growing at 9.9 per cent a year in nominal terms, will surpass Germany by 2022 as the world’s fourth largest economy, with the UK dropping out of the top five after 2017.
He concludes by saying that the way to reach the top spot includes executing a wide-ranging overhaul of the tax system, sorting out the biggest pile of distressed assets among major economies, reviving lackluster productivity, substantially increasing employment opportunities, encouraging corporate investment and overcoming a significant infrastructure shortfall. However, he points out that chances are bright for the nation to overtake its former colonial master.
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