India needs to target 8% growth to outpace China: Barclays
India needs to achieve an annual growth rate of 8% to overtake China as the largest contributor to the global economy, says Barclays Plc. India should prioritize investments in sectors like mining, utilities, transport, and storage, which have a more significant impact on the broader economy, according to Rahul Bajoria, a senior economist at Barclays in Mumbai. Lately, investments in these traditional sectors have been overshadowed by emerging industries such as telecommunications and the digital sector.
Barclays's growth projections and recommendations
Barclays predicts that India's economy could achieve an 8% average growth rate after the upcoming general elections if the new government prioritizes macroeconomic stability. This growth rate could position India as a major global growth contributor, potentially narrowing the gap with China. According to the International Monetary Fund (IMF), China's estimated contribution to global GDP by 2028 is around 26%, while India's contribution, assuming a 6.1% GDP growth rate, is estimated at 16% during the same period.
Government and private sector investment
In recent years, the Centre has ramped up infrastructure spending, allocating a record Rs. 10 trillion in the current fiscal year through March 2024. Prime Minister Narendra Modi aims to boost India's economy to $5 trillion by 2024-25, up from an estimated $3.7 trillion today. However, Barclays believes that the government is unlikely to maintain the strong pace of investment in capital projects, which means the private sector will need to step in.
The importance of traditional sectors
Investing more in traditional sectors is essential for driving economic growth and creating job opportunities. Capacity constraints in these areas emphasize the need for increased investment from both public and private sectors. Higher investment in traditional sectors would also positively impact household income, a key goal of the economic growth story pursued by policymakers, says Bajoria.
