The road to ViksitBharat and How India can beat the Middle-Income Trap

India has set an ambitious target of becoming a developed nation by its 100th year of Independence in 2047. This comes at a time when global trade and capital flows are getting impacted by geopolitical tensions and global climate goals necessitate a low carbon growth path. As per the World Bank, the odds that today’s middle-income countries will grow to high-income status within a generation or two are daunting. 

India has managed to beat the odds successfully to become the world’s fastest growing major economy. However, to become a developed nation by 2047, it also has to overcome the middle-income trap to achieve equitable development. 

How can India beat the Middle-Income trap to become a developed nation by 2047?

 A Roadmap to Viksit Bharat by 2047 documents CII’s vision of a developed India@100 and the steps required to achieve that vision. It is based on an estimated growth trajectory of the overall economy of India by 2047 under two scenarios, Business as Usual and an Optimistic Scenario.

24.82 crore Indians have escaped poverty in the last 9 years and poverty headcount ratio now stands at 11.28%. This also shows that India is headed in the right direction, but the growth trajectory has to grow multi folds to achieve Viksit Bharat in the next 22 years. For that, India has to:

Make efficient use of capital 

For a middle income country like India, it is important that capital is used effectively and not tied to low value firms that do not have much productivity. This includes all forms of capital, be it human, financial, energy, technology or infrastructure. Efficient firms have to expand quicker and inefficient ones should exit the market quickly for capital to be used properly.

Include more women in the workforce 

Female labour force participation rate in India was about 37% in 2023, a number much lower than high income countries. This shows an inefficient use of talent and skill shortage as demands in middle income countries grows rapidly with development. Relying on just education of men and skilling them leaves behind a significant proportion of the population behind, causing income parity to grow further.

Invest in innovation 

Taking a page from the Schumpeterian Growth Model, India has to focus on long-term growth that is driven by innovations and creative destruction. Entrepreneurial investments for new technology must be encouraged while growing the research sector and final output sector. The startup ecosystem in India is strong and around 1 lakh patent was granted in 2023-24, showcasing that there is no dearth of innovation in the country and it must be pushed further.

Digitalise records and processes 

As the world moves toward modernization, digitization of records and processes has become important to increase transparency and efficiency. India has achieved a huge feat with almost 95% of land records in rural India being digitized. With Aadhar, UPI, Digilocker, BharatNet and more, it plans to bring more inclusivity and accessibility. 

Meet basic needs of the population 

While the aspiration for sustainable growth is impressive, India has to meet the basic needs of housing, sanitation, education and healthcare for its population. Universal healthcare is critical in ensuring productivity and well-being. While the Ayushman Bharat scheme aims to be one of the world’s largest insurance scheme and cover the poorest of the population and senior citizens, it still needs to be backed by health infrastructure to support this aim. Similarly, the Sarva Shiksha Abhiyan aimed at universalisation of Elementary education must also improve teacher training, modernize school infrastructure and provide targeted support. Expanding affordable housing projects like The Pradhan Mantri Awas Yojana (PMAY) and ensuring universal access to clean drinking water through Jal Jeevan Mission should also be emphasised to increase the quality of life and achieve sustainable growth. 

For India to achieve the $5 trillion economy target, the collaboration for industries and government is a must. Supportive policies, compliance issues and decriminalisation of business facing laws are needed for the industries to grow unhindered. While good governance is needed to grow our GDP, industries also need to move faster on FTAs and use the Quality Control Orders (QCOs) to raise standards of manufacturing. India’s growth story is an inspiration for the world and strong macroeconomic fundamentals give it a supportive base to become a Viksit Bharat by proactively tackling challenges.