Officially now India has surpassed China to become the world's largest populated country. However, India cannot rely solely on its population to become the world's biggest growth driver, just as China had to undergo economic reforms to grow from being the world's most populous nation to an economic powerhouse.
Bloomberg Economics suggests that India needs to focus on four key areas to cash in on its demographic dividend and become a force in the global economy: urbanization, infrastructure, education and skills, and manufacturing.
Urbanization is a crucial aspect of India's growth, but to fully benefit from it, the country needs to invest in quality public services and create jobs. Infrastructure development is equally important to support urbanization and bring economic benefits.
However, underinvestment in infrastructure over decades has led to inefficient work practices and poor inter-modal transport systems. Education is another vital area of focus, as the quality of education in India is poor, resulting in a skills mismatch and high unemployment. Lastly, India needs to boost its manufacturing sector to increase its GDP, given that it lags significantly behind China in this regard. However, labor laws in India are still restrictive, and the country has not been able to develop highly-efficient industrial parks like its neighbors.
To maintain a 7% growth rate and become the world's biggest growth driver, India needs to improve its urbanization, infrastructure, education and skills, and manufacturing.
