The Indian economy needs to grow at a rate of 8-10 per cent per annum over the next decade to reap the demographic dividend, the Reserve Bank of India said in its monthly bulletin released on Tuesday.
“In order to achieve its developmental aspirations over the next three decades, the Indian economy must grow at a rate of 8-10 per annum over the next decade to reap the demographic dividend that started accruing from 2018 and, as calculations show, will last till 2055,” the central bank said.
In India, conditions are shaping up for an extension of the trend upshift that took the average real GDP growth above 8 per cent during 2021-24, the RBI further added.
Notably, as per an SBI report, India’s GDP growth for the current financial year is expected to be close to 8 per cent.
The RBI further stated that India’s developmental strategy over the next few decades must focus on maximising the contribution of its young and rising labour force to the growth of GVA in order to take advantage of its favourable demographics and attain the escape velocity necessary to break through the low middle income barrier.
In its State of economy article, the RBI said that with the working-age population expected to grow at a rate of roughly 9.7 million in 2021–2031 and 4.2 million in 2031–2041 per year and that attention on labour quality will be needed.
“While labour quality has grown slowly in past years, i.e., at the rate of 0.7 per cent per annum between 1980 and 2021, there is growing evidence that the growth rate of aggregate labour quality has improved since 2017-18,” it further added.
RBI Deputy Governor Michael Debabrata Patra in his article “The Indian Economy: Opportunities and Challenges” highlighted that demographics favour the rising profile of growth.
“Currently, India has the world’s largest population and the youngest. The median age is around 28 years; not until the mid-2050s will aging set in. Thus, India will enjoy a demographic dividend window of more than three decades, driven by a rising working age population rates and labour force participation rate. This is a striking contrast to a world widely confronted with the challenge of aging,” Patra said.
‘Extreme weather may pose risk to inflation’
Continuing to monitor inflation in the country, the RBI has further stated that extreme weather events may pose risk to inflation along with geo-political tensions leading to volatility in oil markets.
Food price uncertainties continue to weigh on the inflation trajectory going forward, the central bank said.
“The success in the disinflation process so far should not distract us from the vulnerability of the inflation trajectory to the frequent incidence of supply side shocks. Our effort is to ensure price stability on an enduring basis, paving the way for a sustained period of high growth,” the bulletin read.
The retail based on the Consumer Price Index (CPI) has eased to 4.9 per cent in March after averaging 5.1 per cent in the preceding two months.
