India GDP Growth

India is expected to sustain an annual GDP growth rate of 6.5% over the next ten years, according to US investment bank Morgan Stanley. The firm noted that higher growth could be achieved if the industrial and export sectors expand more rapidly.

Export Sector: Key to Unlocking Higher Growth

Morgan Stanley highlighted that India’s export market share stands at just 1.8%, far below its potential when compared to its share of the global working-age population and GDP. Boosting this sector, it said, will require a comprehensive reform package, including faster infrastructure development and better last-mile connectivity.

Manufacturing Exports and Job Creation

The report cited studies showing that every manufacturing export job creates two additional jobs in related fields like transportation and logistics. This multiplier effect, if tapped effectively, can be crucial in absorbing the 84 million people expected to join India’s workforce in the next decade.

Reforms for States and Labour Force Readiness

Morgan Stanley suggested that reforms must go beyond central efforts, urging state governments to improve the business environment and focus on skill development. While acknowledging current policy moves, the firm stressed that the magnitude of India’s jobs challenge calls for an accelerated pace of action.

AI and Employment Concerns

The report also flagged potential disruptions from artificial intelligence. It warned that AI adoption could reduce employment opportunities, particularly in IT services – historically a major job creator – and in the domestic services sector.

Growth Needed to Maintain Stable Employment

Morgan Stanley’s scenario analysis underscored the link between GDP growth and unemployment stability:

• 7.4% GDP growth is needed to maintain a stable unemployment rate if participation remains constant.

• If participation rises gradually to 63%, the required growth jumps to 9.3%.