India’s economy could expand by an average of 6.5 per cent a year over the next decade, with industry and exports set to drive much of that growth, according to a report by US investment bank Morgan Stanley.
Exports below potential
India accounts for just 1.8 per cent of global exports despite its large share of the world’s GDP and working-age population. The report said a comprehensive package of reforms, combined with faster infrastructure rollout, could help the country capture a larger share of trade. It also noted that each job created in manufacturing exports has the potential to generate two more in sectors such as transport and logistics.
Employment challenge ahead
At least 84 million people are expected to enter the labour force in the next decade, even if participation rates remain unchanged. Analysts warned that job creation will need to outpace current levels to avoid rising unemployment. The report recommended that states be incentivised to improve the business climate and that investments in skilling be scaled up to match industry demand.
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Higher growth needed to absorb workforce
The baseline growth forecast of 6.5 per cent may not be sufficient to meet labour market pressures. The report said GDP would need to grow at an average of 7.4 per cent to keep unemployment stable if participation rates remain the same. Should participation rise to 63 per cent, average growth would need to accelerate to 9.3 per cent.
AI and sectoral risks
Artificial intelligence is expected to reduce job creation in some traditional sectors. IT services – a long-time employment driver and domestic services could be most affected, the report said. Diversification into other high-growth areas was flagged as a priority. While acknowledging that policy reforms are already under way, the report called for faster action on exports, infrastructure, ease of doing business and skills development. Without stronger measures, India may find it difficult to convert its demographic advantage into inclusive growth.
