Vijay Joshi

CHAPTER 2: 1947–2016 — A Quick Tour of India’s

Economic Journey

🔹 1. Two Big Shifts in Growth

India saw two important turning points in its economic
growth:

1.​First shift (around 1950): After independence, India’s

growth rate rose from a very slow 1% to about 3.5% per
year, but this was still not fast enough to reduce poverty.
This slow pace was jokingly called the "Hindu rate of
growth."
2.​Second shift (around 1980): Growth jumped to over 6%
per year, which was much faster and helped reduce
poverty more noticeably. However, even this faster growth
started slowing down after 2011.

🔹 2. 1950–1980: The Old System (Ancien Régime)

🧑‍💼 Political Background
●​ This era was dominated by Jawaharlal Nehru and later
his daughter Indira Gandhi.
●​ India followed a strategy of centralized planning—the
government made most economic decisions.
●​ Public sector (government-run companies) played a
big role in industries and infrastructure.
📉 Problems
●​ Despite an increase in investment (spending on things like
roads, factories, etc.), growth was low.
●​ Too many rules and permits (License Raj) created red
tape and corruption.
●​ The government tried to control everything, often without
enough understanding or success.
●​ At the same time, education and healthcare were
neglected, especially for the poor.
●​ Poverty stayed very high—over 50% of Indians
remained poor, and the number of poor people
increased.
📊 Why Growth Stayed Low
●​ Growth didn’t improve even though more money was
being invested.
●​ This was because the money was used inefficiently due
to:
○​ Over-control by the government.
○​ Poorly run public enterprises.
○​ Weak human development (poor education, health,
etc.).
●​ Private businesses struggled because of too many
controls and high taxes.
●​ Foreign trade was discouraged in the name of
"self-reliance."
📚 Social Development Compared
●​ Compared to countries like China and South Korea, India
lagged behind in:
○​ Life expectancy
○​ Infant mortality
○​ Literacy
●​ East Asian countries invested heavily in education and
healthcare and saw big gains—India did not.

🔹 3. 1980–2015: Partial Reforms and Rapid Growth

🧑‍💼 Political Background
●​ In 1980, Indira Gandhi returned to power. Her government
took a big loan from the IMF and increased public
spending.
●​ After her assassination in 1984, Rajiv Gandhi came to
power. He wanted modernization and introduced some
economic reforms.
●​ But scandals like Bofors and rising communal tensions
(like the Ram Janmabhoomi issue) led to a loss of focus
on reforms.
💣 1991 Crisis
●​ India faced a serious Balance of Payments crisis in
1991:
○​ Foreign reserves were down to just 2 weeks of
imports.
○​ Inflation was over 12%.
○​ The fiscal deficit was huge.
●​ In response, Prime Minister Narasimha Rao and
Finance Minister Manmohan Singh launched major
economic reforms.

🔄 The 1991 Economic Reforms

The reforms included:

●​ Devaluing the rupee to make exports more competitive.

●​ Reducing trade barriers—making it easier to import and
export.
●​ Ending industrial licensing—private firms could operate
more freely.
●​ Allowing foreign investment.

The reforms helped:

●​ Boost growth.
●​ Increase efficiency in the economy.
●​ Modernize the private sector.

🔍 Growth Performance Since 1980

💡 What Caused Higher Growth?
●​ More investment: From 17% of GDP earlier to 21% in the
1980s.
●​ Better productivity due to early liberalization.
●​ Expansionary policies—governments borrowed more to
fund growth.
●​ But this led to the 1991 crisis, showing that reform
without discipline can backfire.

🔚 Reform Slowdown and Political Instability (1996–2004)

●​ After 1996, several unstable governments came to
power. Reforms slowed down.
●​ However, even these governments did not reverse
earlier reforms.
●​ The private sector continued to grow, but deep
structural reforms were left unfinished.
 Background: The 1991 Crisis and Reform
After the economic crisis of 1991, caused by a balance of
payments collapse, high fiscal deficit, and low foreign
reserves, the new Congress (I) government led by Prime
Minister P. V. Narasimha Rao and Finance Minister Dr.
Manmohan Singh launched a bold economic reform program.

🔄 The Reform Package Included:

1.​Devaluation of the Rupee – to make exports more
competitive.
2.​Import liberalization – reducing tariffs and controls.
3.​Industrial delicensing – businesses no longer needed
government permission for most industries.
4.​Encouraging foreign investment – more sectors were
opened up.

These reforms were shocking but necessary, and while they

initially caused economic pain (like a brief recession), they
helped set the foundation for future growth.

📈 Growth After Reforms (1993–2002)

●​ GDP growth improved to an average of 6% per year.
●​ This period (1993–2002) is often seen as a consolidation
phase:
○​ The reform pace slowed.
○​ Public investment dropped.
○​ Infrastructure lagged behind.
 ●​ Yet the private sector grew stronger and more
confident.

Joshi says this period was not dramatic, but it created the
conditions for the high growth that came after 2003.

🚀 2003–2011: India’s High Growth Phase

From 2003 to 2011, India’s growth surged to 8.5% per year on
average. This is the period when:

●​ Private investment boomed.

●​ India became one of the fastest growing economies in
the world.
●​ Corporate profits soared, and India gained global
attention.

But Joshi points out that this phase had unique global
tailwinds:

●​ A strong world economy.

●​ Plenty of cheap capital available internationally.

He warns that much of the growth was cyclical, not

structural, meaning it was boosted by temporary global
conditions rather than deep, sustainable changes in the Indian
economy.

⚠️ 2011–2015: Signs of Trouble

The golden period ended as:

●​ Investment slowed down.

●​ Credit bubbles burst, especially in infrastructure and
power.
●​ Global conditions worsened (like oil prices and capital
outflows).

Growth dropped to about 5.4%, and the capital-output ratio

worsened – meaning more investment was needed for less
output.

📉 Key Takeaway from These Pages (38–40):

India had three phases post-1991:

1.​1991–2002: Early liberalization and moderate growth.

2.​2003–2011: High private investment, fast growth, but
largely due to global tailwinds.
3.​2011–2015: Decline begins due to internal weaknesses
and global slowdown.

Joshi emphasizes that sustained, high-quality growth

requires:

●​ Continued structural reforms.

●​ Improved governance.
●​ Better public services and infrastructure.

Without these, the boom of 2003–2011 could be a missed

opportunity, not a permanent take-off.
 Rakesh Mohan

THE INDIAN ECONOMY: A STORY OF CONSISTENT GROWTH

●​ Current Benchmarks and Future Aspirations:

○​ Recent Figures: In 2017, India’s per capita GDP was about US $1,800 with
an overall GDP of approximately US $2.6 trillion, compared to China’s per
capita GDP of around US $8,700 and overall GDP of about US $12.2 trillion.
○​ Aspirational Target: Over the next two decades, India should aim to double
its per capita income in each decade—a sustained per capita growth rate of
around 7% and overall GDP growth of over 8% per year. By 2035, this would
mean a per capita income of roughly US $6,000 (in 2011-12 prices) and a
total GDP in the vicinity of US $10 trillion.
○​ Implications: Even with these ambitious targets, India's per capita income
would still lag behind China’s current levels and be about 10% of today’s US
level. Nevertheless, this growth level is expected to be sufficient to eliminate
poverty and raise living standards significantly.
●​ Historical and Comparative Perspective:
○​ East Asia, for example, increased its GDP tenfold in about 30 years (from
1975 to 2005). If India can maintain a similar sustained growth path over
three decades, it could achieve comparable expansion.
○​ Only a few nations have sustained such high growth rates long enough to
escape the “middle income trap,” making this an essential goal given India’s
persistent levels of poverty.
●​ Growth Dynamics Since Independence:
○​ Early Growth Patterns: The slow “Hindu rate of growth” in the early decades
post-independence marked an important departure from longstanding
stagnation. There was a consistent acceleration in growth from the 1950s
onwards—with the notable exception of the slowdown from 1965 to 1981.
○​ Sectoral Contributions:
■​ Industry and Services: Initially, industrial growth was robust after
independence. Over the decades, services have shown continuous
acceleration and presently drive a significant part of India’s overall
GDP growth.
■​ Agriculture: Agricultural growth has remained modest and volatile,
largely due to weather fluctuations. Periods of overall economic
slowdown (e.g., 1965–81, 1997–2003, and 2014–19) have been
accompanied by a loss of pace in the agricultural sector.
○​ Financial Underpinnings:
■​ Long-term trends show a marked increase in domestic savings (from
11% of GDP during 1950–65 to over 33% during 2003–08) and in
domestic investment (rising from 12% to approximately 34% over the
same period).
■​ India’s growth has been predominantly financed by domestic savings,
with only modest reliance on external borrowing. Episodes when the
current account deficit slightly increased were later associated with
balance-of-payments crises.
 ●​ Policy Reforms and Their Impact:
○​ The 1965–81 Slowdown: This period, considered the darkest in
post-independence economic history, was linked both to external shocks
(droughts, wars, oil price shocks) and to restrictive policy actions that closed
India’s economy—contrasting with the openness that fueled growth in East
and Southeast Asia.
○​ Reform Measures:
■​ The slowdown was reversed in the 1980s through
competitiveness-boosting reforms.
■​ Comprehensive reforms began in the early 1990s: industrial
deregulation, opening up to foreign direct investment and technology,
trade liberalization, real devaluation of the rupee, tax restructuring,
interest rate deregulation, and overall improvements in the policy
framework led to renewed private investment and export growth.
○​ Subsequent Setbacks: Despite these gains, growth momentum experienced
periodic losses in the latter half of the 1990s (and again after global crises
such as the North Atlantic Financial Crisis) due to factors like fiscal setbacks,
poor agricultural performance, and over-optimistic investment planning.
●​ Future Policy Imperatives:
○​ A coherent and interconnected policy framework is critical. Decision-making
“in silos” or excessive centralization should be avoided—the principle of
subsidiarity should guide the coordination of policy me asures across
sectors.
○​ The country must consistently prioritize growth-friendly policies while
remaining vigilant to avoid past policy missteps and external vulnerabilities.
○​ Given the complexity and interconnectivity of economic sectors, there is no
room for complacency. India must harness the lessons from decades of
growth to craft strategies for a new and sustained growth trajectory that also
supports social welfare and poverty elimination.

This summary encapsulates the key points regarding where India stands today, the
ambitious yet necessary growth targets for the coming decades, the historical evolution of its
economic dynamics, and the policy challenges and reforms critical for sustaining vigorous,
inclusive growth.

The Golden Era of Growth: 2003-08

●​ Renewed Growth Momentum (2003-08):

○​ Following 2003-04, India's growth accelerated due to:
■​ Restructuring measures by domestic industry in the preceding period
(1997-2003)
■​ Declining domestic nominal and real interest rates
■​ Fiscal consolidation and reduced government borrowing
■​ Strong global demand and favorable global liquidity conditions
 ○​ This combination fostered a positive investment climate, improved corporate
profitability, and resulted in broad-based growth across agriculture, industry,
and services.
●​ Fiscal and Savings Improvements:
○​ A progressive reduction in the fiscal deficit, alongside an increased gross
tax/GDP ratio and tighter control on subsidies, freed up resources for private
investment.
○​ Higher public and corporate savings, supported by stable household savings,
led to an overall increase in the economy’s savings rate.
○​ Net household financial savings were sufficient to support both government
and corporate financing needs.
●​ Effective Monetary Management and Inflation Control:
○​ Despite large inward capital flows, innovative monetary management—such
as using the market stabilisation scheme—contained inflation at levels
comparable to earlier periods.
○​ Notably, even as global commodity inflation rose, domestic inflation
(measured by both wholesale and consumer price indices) remained stable.
○​ The government’s agricultural support price policy contributed to lower
increases in minimum support prices relative to wholesale prices, aiding in
inflation control.
●​ Financial Sector and Infrastructure Enhancements:
○​ The financial sector showed continuous improvement in asset quality and
efficiency, bolstering the overall economic environment.
○​ Infrastructure investment increased by approximately 1% of GDP, split nearly
equally between the public and private sectors:
■​ There was a notable surge in investment in roads.
■​ In contrast, railway investment stagnated as a share of GDP.
○​ Upgraded infrastructure supported high growth in manufacturing and trade.

Together, these factors created a conducive environment for sustained and broad-based
economic growth during 2003-08, with improvements in fiscal balance, savings rates,
monetary policy, sectoral performance, and infrastructure investment contributing
significantly to India’s high-growth phase.

The Current Deceleration: 2012-18

●​ Overshot Post-Crisis Stimulus: After the 2008-09 crises, rapid monetary and fiscal
expansion helped trigger a period of high growth. However, the stimulus was
excessive—leading to inflation and increased current account pressures—which later
necessitated monetary tightening. This tightening, exacerbated by persistent food
inflation, dampened overall economic activity.
●​ Fiscal Policy and Demand Pressures: The fiscal stimulus was characterized by tax
cuts and increased subsidies without corresponding capital expenditures. This
boosted demand and inflation but was withdrawn too slowly, contributing to a
crowding out effect on private sector investment, while high nominal interest rates
further squeezed corporate profitability.
 ●​ Widening Current Account Deficit: Several factors—such as slower global export
growth, high domestic inflation, negative real interest rates on deposits, and weak
pass-through of international oil prices—led to a significant widening of the current
account deficit between 2012-14. Limited foreign exchange intervention and
continued opening of the capital account (particularly to potentially destabilizing debt
flows) worsened the situation.
●​ Industrial Slowdown and Data Discrepancies: The slowdown was marked by a
notable deceleration in industrial growth since 2011. Conflicting indicators (between
the Index of Industrial Production, Annual Survey of Industries, and national
accounts) make it hard to pinpoint the precise nature of the slowdown, complicating
policy formulation.
●​ Key Policy Lessons: The Great Slowdown of 2012-14 underscores several
important lessons for restoring high growth:
○​ Maintain prudent fiscal policy with a focus on capital investment.
○​ Ensure a low and stable inflation environment.
○​ Manage the capital account to keep the current account deficit within
acceptable limits.
○​ Prioritize infrastructure investment.
○​ Reinvigorate the manufacturing sector—ideally moving it toward more robust,
double-digit growth—to support overall economic momentum.

In essence, while multiple macroeconomic and policy factors contributed to the slowdown
between 2012-14, the way forward lies in a coordinated policy strategy that addresses fiscal
discipline, inflation management, sound capital account policy, and a renewed focus on
sustainable industrial and infrastructure investment.

A POSSIBLE FUTURE HIGH GROWTH SCENARIO 2020 TO 2035

●​ Historical Context and Aspirational Framework:

○​ Indian growth spurts have traditionally been marked by rising domestic
investment rates—primarily financed by increasing domestic savings, with a
modest contribution from external sources such as FDI.
○​ Recent aspirational projections (as outlined in reports like the National
Transport Development Policy Committee’s India Transport Report: Moving
India to 2032 and NITI Aayog’s Strategy for New India @75) set out a
macroeconomic framework designed to move India from the current average
GDP growth of about 7–7.5% to a sustained 8–9% growth rate over the
period 2020–2035.
○​ These projections, although ambitious compared to recent performance, are
based on prior success—in 2007–08, for instance, gross fixed capital
formation (GFCF) reached about 33% of GDP.
●​ Key Macroeconomic Projections and Required Movements:
○​ Investment and Savings Rates:
■​ The scenario envisions an increase in the GFCF rate:
■​ From roughly 31% in 2012–18 to about 33–35% during
2020–25, climbing further to 35–38% in 2030–35.
 ■​ Domestic savings are projected to rise from around 31–33% during
2020–25 to 33–36% during 2030–35, with all major saving
components (household, private corporate, and public savings)
contributing.
■​ The absorption of external savings is kept modest (around 2–2.5% of
GDP) to maintain a sustainable current account deficit (CAD).
○​ Efficiency Considerations:
■​ A key measure of productivity is the Incremental Capital Output Ratio
(ICOR).
■​ Historical ICORs for India have mostly ranged between 3.5 and 4.5;
however, recent figures have risen to nearly 5.
■​ The projected growth path requires an improvement in efficiency with
an assumed average ICOR of about 4.2, indicating the need for
enhanced resource-use efficiency.
●​ Sectoral Growth Transformation:
○​ Even under a relatively optimistic agricultural growth scenario of around 4%
per year, achieving overall GDP growth above 8% is difficult without
significant acceleration in manufacturing.
○​ To meet the growth targets, manufacturing would need to grow at close to
10% per annum.
○​ Although India experienced such high manufacturing growth during 2005–08,
sustaining this level over a sustained period of decades remains the key
challenge for transforming the economy and escaping the middle-income
trap.

In essence, the projections call for a coordinated macroeconomic strategy where higher
domestic savings and increased investment lead to improved productivity (a lower ICOR),
and where a profound structural change—particularly in the manufacturing sector—is
essential to support a sustained high-growth trajectory over the coming decades.

Financing Growth

Household Savings

●​ Historical Trends:
○​ Household savings, a cornerstone of Indian domestic savings, increased from
around 21% of GDP during 1997–2003 to just under 24% during 2008–11.
○​ However, they later fell to about 17% during 2016–18, with net household
financial savings dropping from a high of 11–12% of GDP in 2007–08 to
roughly 7% recently.
●​ Target and Policy Measures:
○​ The goal is to restore net household financial savings to around 10% in the
near term and gradually lift them to about 13% by 2030–35.
○​ This improvement is anticipated to be supported by ongoing financial
inclusion measures (e.g., Jan Dhan Yojana, mobile-based financial
technologies) and sustained income growth.
 ○​ The success of these efforts is also predicated on maintaining low inflation so
that nominal interest rates yield reasonable real returns for savers,
supplemented by supply-side policies (especially in agriculture and rural
infrastructure).

Private Corporate Sector Savings

●​ Growth During High-Growth Periods:

○​ During the golden growth era (2003–08), private corporate savings doubled
from 3.9% to about 7.9% of GDP, driven by high profitability.
●​ Future Outlook:
○​ Sustaining private corporate savings and investment at current levels
(10–12% of GDP) is critical.
○​ This should enable corporate sector investment to rise further to 12–15% of
GDP by 2025–35.
○​ Prudent fiscal consolidation and low, stable inflation will be key facilitators.

Public Sector Savings

●​ Government Bookkeeping vs. Public Enterprises:

○​ Post the 2008–09 fiscal stimulus, government savings (i.e., the combined
revenue surplus/deficit) turned negative and have remained so, reflecting a
persistent revenue deficit.
○​ By contrast, public sector enterprises had historically shown positive saving
rates (around 3–4% of GDP) but have recently fallen to less than 2.5%.
●​ Desired Improvements:
○​ With a reformed fiscal framework (e.g., new FRBM guidelines at the central
and state levels), government savings should be restored to mildly positive
levels.
○​ Efforts include reducing central subsidies (already reduced from 2.6% of GDP
in 2012–13 to around 1.6% now) with an ideal target of around 1% of GDP.
○​ Overall, public sector savings (government plus public enterprises) are
projected to improve from around 1.5% of GDP currently to approximately 3%
during 2020–25, and further to about 3.5% by 2030–35.
●​ Importance for Growth:
○​ Reducing the fiscal deficit and lowering public borrowing (targeting around
4–5% of GDP, as was the case in 2007–08) is essential to free up financial
resources.
○​ Currently, high fiscal borrowing (estimated at nearly 9% of GDP) is effectively
absorbing household savings and putting upward pressure on real interest
rates, which in turn crowds out private corporate investment.

Tax Revenue and Fiscal Policy

●​ Declining Tax Ratios:

○​ The gross tax-to-GDP ratio for the central government fell from a peak of
about 12% in 2007–08 to approximately 10% during 2009–15, with recent
estimates around 10.9% of GDP for 2018–19.
 ○​ Personal income tax collections had been buoyant for a while but have begun
to decline relative to GDP, with the target of 3% for 2019–20 now looking less
likely.
○​ Corporate income tax ratios have also declined from around 4% of GDP in
2007–11 to below 3.5% in recent years, partly due to tax cuts and lower
corporate profitability.
●​ Prospects for Improvement:
○​ The rollout of the Goods and Services Tax (GST) and efforts toward
simplification promise to improve the buoyancy of indirect tax collections.
○​ Historically, India's overall government revenue-to-GDP ratio is lower than
that of comparable Asian EMEs and nations with similar per capita incomes.
○​ With rising incomes and a growing middle and upper class—as evidenced by
indicators such as the doubling of car sales and a significant increase in
high-income taxpayers—the prospects for higher income tax collections are
optimistic.

External Savings

Historical Export Growth and Recent Slowdown:

●​ From 2002 onward, Indian exports (in dollar terms) grew at 20–25% per year, nearly
doubling their share in GDP from roughly 20% to about 25% between 1998–2002
and 2008–12.
●​ However, since around 2012 exports have stagnated, causing their share of GDP to
fall to about 16%. Consequently, India’s share in global trade has declined, especially
against other Emerging Market Economies (EMEs).

Aspirational Export Growth Targets:

●​ To support sustained high growth from 2020 to 2035, exports are projected to grow at
an annual rate of 11–12%.
●​ This would increase the share of exports in GDP to about 30% by 2025–30 and
further to perhaps 35% by 2030–35, approaching levels reached by China in 2006.

Implications for the Current Account Deficit (CAD) and Capital Flows:

●​ A sustainable CAD level is envisaged at around 2.0–2.5% of GDP.

●​ To support this, an annual accumulation in foreign exchange reserves at
approximately 2% of GDP is assumed.
●​ Overall, net capital flows are targeted at around 4.0–4.5% of GDP during 2020–35.
●​ In current absolute terms, this requires net capital inflows of roughly US $50–65
billion to finance the CAD along with an additional US $50 billion for
reserves—totaling around US $100–115 billion.
●​ By 2035, these requirements are projected to climb to approximately US $180–220
billion for the CAD and another US $180 billion for augmenting reserves annually.

Composition of Capital Flows:

 ●​ Given the volatile nature of debt flows, the projections assume that equity flows
should dominate, accounting for 60–65% of net capital flows, with debt flows
comprising the remaining 35–40%. This target is broadly in line with the prevailing
debt/equity ratios in the Indian corporate sector.

Overall Implications:

●​ Despite the need for external savings to finance trade and maintain external
sustainability, these projections underscore a continuing imperative to boost domestic
savings, which form the primary source of investment funding in India’s growth
process.

Manufacturing

●​ Global Importance of Manufacturing:

○​ Rapid industrialization and manufactured exports have been proven as
reliable engines for sustained, high economic growth—as seen in Japan,
Korea, and China.
○​ While many economies have thrived on manufacturing growth, there is
growing evidence of a softening structural shift due to premature
deindustrialization in some countries.
●​ Need for Accelerated Manufacturing Growth in India:
○​ To sustain high overall growth, Indian manufacturing needs to accelerate
toward double-digit growth rates and maintain that performance over the next
20+ years.
○​ Given the open nature of India’s current account, future manufacturing must
achieve international competitiveness rather than merely leveraging its
abundant labor.
○​ Focused reforms are necessary to address legacy regulatory issues that
constrain the efficient use of both land and labor.
●​ Challenges and Policy Considerations:
○​ Persistent domestic inflation above global levels poses challenges. Although
higher GDP growth attracts significant foreign investment, unmanaged capital
inflows risk overvaluing the exchange rate.
○​ Effective inflation management—especially through maintaining a stable,
competitive real effective exchange rate—is essential for supporting exports,
manufacturing activity, and overall corporate health.
○​ A comprehensive approach involving urban land and labor reforms coupled
with robust infrastructural support in power, transport, and logistics is critical
for accelerating manufacturing, particularly in labor-intensive sectors.

In essence, if India is to realize its growth aspirations, its manufacturing sector must not only
rebound but also transform through targeted structural reforms and improved
macroeconomic stability. This combined effort will be pivotal in boosting productivity,
enhancing competitiveness, and ensuring sustained long-term growth.
 Infrastructure Investment

●​ Critical Role of Infrastructure in Growth: Sustained high economic growth,

particularly in manufacturing and trade, hinges on robust infrastructure investment.
As manufacturing expands (targeting around 10% growth) and global trade
increases, demand for efficient power, transport, and logistics systems will soar.
●​ Investment Targets and Comparisons:
○​ According to the National Transport Development Policy Committee (NTDPC,
2014), overall infrastructure investment must rise from the current 5–5.5% of
GDP to about 8% during the 2020s and beyond—comparable to levels seen
in East and Southeast Asian economies.
○​ This enhanced investment covers all transportation aspects, including ports,
airports, domestic transport linkages, and trade logistics.
●​ Sectoral Responsibilities and Public–Private Roles:
○​ The public sector is anticipated to play a dominant role in traditionally
essential areas such as electricity, railways, roads, and bridges.
○​ The private sector is expected to lead in communications, ports, airports, and
commercial vehicles.
○​ A special focus is placed on expanding investment in Indian Railways—from
roughly 0.4% of GDP historically to a target of at least 1% (ideally achieved
by 2017–22 and sustained thereafter)—which is considered vital for linking
inland manufacturing hubs to ports and supporting broader trade and
productivity gains.
●​ Human Capital Aspect: Future manufacturing will demand a more skilled workforce,
so infrastructure expansion must be accompanied by policies directed at building
adequate skilled manpower.
●​ Policy Implications:
○​ Achieving sustained growth of 8.5–9% over the next 15 years requires a
coordinated, policy-driven “big push” that breaks away from
business-as-usual approaches.
○​ Fiscal consolidation is critical to allow the public sector to increase its
infrastructure investments without exacerbating fiscal deficits.
○​ Enhancements in all areas—ranging from transport to logistics and
power—are necessary to support the expected growth in manufacturing and
trade.

In summary, a significant upscaling of infrastructure investment—particularly in transport and

railways—is essential to drive and sustain the high growth rates that India aspires to
achieve. This will require not only greater public spending but also a complementary
improvement in human capital and effective policy coordination to ensure that investments
translate into enhanced productivity and competitiveness.