World Bank Chief Economist Indermit Gill said on Thursday that although India is better positioned than many of its peers to navigate the current global challenges, it should accelerate its structural reforms.
“Time is of the essence for India to accelerate its structural reforms, and the changes needed are not happening quickly enough,” Gill said, urging policymakers to capitalise on the economy’s strengths while addressing inefficiencies and fostering institutional resilience.
Speaking at the Global Economic Policy Forum 2024, organised by the Confederation of Indian Industry (CII) with the theme ‘Decadal Priorities for the Global Economy’, Gill noted that global economic growth has been decelerating, with the potential growth rate in advanced economies halving over the past two decades. Emerging markets and developing economies are also seeing a decline in potential growth rates, exacerbated by geopolitical tensions, trade fragmentation, policy uncertainty, and persistent inflation, he observed.
Pointing out major structural inefficiencies in India’s economy, Gill said the first is the underutilisation of capital, with unproductive firms continuing to operate and limiting the potential for resource reallocation to more efficient, value-adding firms. The second inefficiency is in talent allocation.
“Despite the increasing demand for skilled labour, India continues to underutilise a major portion of its talent pool, particularly women.”
The third challenge is energy efficiency. “India’s energy-to-output ratios are high, making the country one of the most energy-intensive economies globally,” he added.
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Gill said that middle-income countries, including India, are more prone to slowdowns compared to low-income or high-income countries. He observed that while the share of middle-income countries in global gross domestic product has grown, their productivity and efficiency remain considerably below those of high-income economies.
To transition to a high-income country, Gill suggested that India should prioritise improving productivity through the infusion of new technologies and innovation, particularly encouraging the growth of large firms, as they are often the engines of innovation.
He further stressed the importance of utilising periods of economic crisis as opportunities to introduce structural reforms. He noted that India must also embrace inclusive growth by providing equitable opportunities for all.
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