India needs to prioritize the following four things

Prime Minister Narendra Modi has an ambition to make India a developed economy by 2047. Analysts say the Modi-led coalition will not derail India's economy and development, but the government needs to do four things to ensure it can realise the dream.

India has embarked on a major infrastructure drive and has made significant strides in connecting and modernizing its highways, railways and airports. Puneet Vikram Singh, Nature and Conceptual Photographer, | Moments | Getty Images

Over the past two years, Prime Minister Narendra Modi has confidently talked about his ambitious goal of making India a developed economy by 2047.

All eyes will now be on Modi and the Bharatiya Janata Party-led coalition to see whether they can maintain the economic momentum and continue improving the lives of millions in a third consecutive term.

Analysts predict these four areas will be at the top of the agenda.

1. Boost infrastructure

India has undertaken a major infrastructure drive and has made significant strides in connecting and modernizing its highways, railways and airports.

Last year, consultancy firm EY predicted India would become a $26 trillion economy by 2047 and stressed that building the country's infrastructure capacity would be key to making this happen.

“Since Modi took office, he has been working hard to build ports, railways and all kinds of hard infrastructure to make business run smoothly. He will double down on that,” said Samir Kapadia, CEO of India Index and managing director at Vogel Group.

India still lags behind China in this area and needs to work harder if it is to achieve a high growth trajectory to continue attracting foreign investors.

In her interim budget in February, Finance Minister Nirmala Sitharaman estimated capital spending would rise 11.1% to $133.9 billion in fiscal 2025, largely focused on building railways and airports.

But Santanu Sengupta, India economist at Goldman Sachs, notes that improving connectivity between cities should not be the sole focus.

“Along with building physical infrastructure, India needs to be consistent in implementing structural reforms... There is a need to look at land and release land for building more factory infrastructure,” Sengupta said, adding that this would boost job growth in the sector.

However, analysts stressed that the government could face opposition as Modi's weakness could make it more difficult to acquire land for projects.

“Such goals may be harder to achieve if state-level parties have temporary veto power due to coalition structures,” said Richard Rossow, senior adviser and US-India policy research chair at the Center for Strategic and International Studies.

2. Increase production

Over the past decade, Modi has aggressively pushed India to become self-reliant and overtake China to become Asia's largest manufacturing powerhouse — especially in chipmaking.

Major US tech companies are increasingly moving parts of their supply chains to India. The Financial Times reported in December that Apple had told component suppliers it would source batteries from Indian factories for its upcoming iPhone 16. Google is also said to be starting production of its Pixel phones in India this quarter.

Apple supplier Foxconn has announced it will increase investment in India, while Micron Technology expects to create the first India-made semiconductor chip as early as 2025.

According to a forecast by Counterpoint Research and the Electronics and Semiconductor Association of India, India's semiconductor industry will reach a value of $64 billion by 2026, three times higher than the $23 billion in 2019.

“This is probably going to be India’s biggest source of revenue in the next five to 10 years,” Kapadia said. “Prime Minister Modi is convinced that if India can get into semiconductor manufacturing, and if he does it right, India can become a frictionless economy.”

Employees work on a mobile phone assembly line at Padget Electronics, a subsidiary of Dixon Technologies, in Noida, India. Bloomberg | Getty Images.

3. Control high unemployment rate

Unemployment is now one of the biggest problems facing the world's most populous country, and the skills mismatch is exacerbating the problem, said Sumedha Dasgupta, senior analyst at The Economist Intelligence Unit.

“There is a mismatch between the skills of the domestic workforce and the high demand for innovation from employers. This will certainly continue into this decade, possibly even into the 2030s,” she told CNBC.

According to the Centre for Monitoring Indian Economy, India's unemployment rate rose to 8.1% in April from 7.4% in March.

A survey conducted by the Centre for Developmental Societies in April, ahead of the election, found unemployment to be the top concern for 27% of the 10,000 people surveyed. More than half (62%) of those surveyed said finding a job had become more difficult over the past five years of Modi’s second term.

Analysts stress the new coalition government must now improve local education standards and skills training to ensure people have stable jobs in the right sectors.

“While those with high educational qualifications and practical experience can secure jobs in this sector, creating broad and equitable employment opportunities requires a more holistic approach,” said Vivek Prasad , Markets Leader at PwC India.

Prasad told CNBC that new education and vocational training policies will “engage individuals at every level of the production value chain, ensuring that the benefits of economic progress are shared across society,” adding that boosting women’s employment is crucial to boosting India’s growth.

4. Increase foreign investment

From veteran emerging markets investor Mark Mobius to global strategist David Roche, market experts remain bullish on India.

The National Stock Exchange of India has a total market capitalization of $4.9 trillion — the third largest in the Asia-Pacific region, according to data from the World Federation of Exchanges. India’s market capitalization is expected to grow to $40 trillion over the next two decades.

Benchmark indices Nifty 50 and Sensex have outperformed this year — up 8% and 7% respectively year-to-date, according to LSEG data.

However, analysts say foreign direct investment into the country needs to pick up to spur further economic growth and development.

Foreign direct investment into India last year was relatively weak due to a difficult private equity funding environment due to high interest rates in the United States, said Goldman Sachs' Sengupta.

“India is likely to attract more FDI inflows from the US as interest rates fall and the financing environment becomes easier,” Sengupta said.

Prabhat Ojha, partner and head of Asia client practice at Cambridge Associates, noted that investment in India “still has a lot of work to do” to continue attracting foreign capital.

He recommends investors to pay more attention to India's banking sector - a sector that currently has quality growth and good capital allocation.

“There was a cleanup of Indian banks between 2017 and 2019 and they are in a very healthy state today,” Ojha told CNBC.

Source: https://baoquocte.vn/tro-thanh-quoc-gia-phat-trien-vao-nam-2047-an-do-can-uu-tien-4-viec-sau-284460.html