India needs to elevate its investment rate from the current 31-32 per cent to 34-35 per cent to sustain a growth rate of 7per cent or more, according to Mahendra Dev, Chairman of the Economic Advisory Council to the Prime Minister (EAC-PM). Speaking at the Delhi School of Economics on Wednesday, Dev stressed the critical role of the private sector in driving this growth.

He called for increased savings and financial sector reforms to ensure domestic investment can replace uncertainties in foreign investments. "To finance this expansion, we need to build on our savings and improve financial sector infrastructure," he said.

Dev also highlighted the importance of focusing on labour-intensive manufacturing to transform India into a developed nation by 2047. He noted that the absence of a robust mid-size manufacturing sector in India is hindering productivity and competitiveness. "Addressing the 'missing middle' in manufacturing is essential. This can be achieved through targeted land and labour reforms, with states playing a key role," he added.

Additionally, Dev pointed to the complementary nature of manufacturing and services in India's growth strategy. "The expansion of the service sector requires a strong manufacturing base," he explained.

Exports were also underscored as a key driver of growth. Despite constituting only 20 per cent of India's GDP, exports have a significant multiplier effect across various sectors. While there are suggestions for India to join regional trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and Regional Comprehensive Economic Partnership (RCEP), Dev emphasized the importance of evaluating such options carefully. "A rule-based World Trade Organization (WTO) system is always preferable to protectionism," he said.

Looking globally, Dev pointed out the resurgence of industrial policy in both developed and developing countries. "India must avoid the middle-income trap to ensure continued progress. Inclusive growth and employment generation are paramount for sustainable development," he concluded.

Dev also acknowledged the progress of less-developed states in improving human development, though disparities in income per capita remain.

(Source: Business Standard)