In recent news, Barclays (LON:BARC)' senior economist, Rahul Bajoria, emphasized the need for India to achieve an 8% annual growth rate to equal China's projected contribution to the global economy by 2028. This statement was made on Tuesday, underscoring the necessity for increased investment in traditional sectors such as mining, utilities, transport, and storage. These sectors have been overshadowed by emerging industries like digital and telecommunications.
Bajoria argued that prioritizing macroeconomic stability by the new government could help India reach this target. The International Monetary Fund (IMF) data cited in the Barclays report projects China's global GDP contribution at 26% through 2028, with India's share predicted at 16%, given a GDP growth rate of 6.1%. However, if India can reach an 8% growth rate, its contribution could align with China's by 2028.
Despite being the fastest-growing major economy excluding China in 2023, India's share of the global economy still lags behind China and the US. This is even with the Indian government's efforts to tackle inflation and boost infrastructure spending. Under Prime Minister Narendra Modi's leadership, a record allocation of Rs 10 lakh crore has been set for infrastructure spending for the fiscal year ending March 2024. The objective is to raise India's economy from its current estimated $3.7 trillion to $5 trillion by 2024-25.
However, Barclays forecasts a slowdown in government investment pace, highlighting the need for both public and private sector participation. Policymakers' economic growth story, capacity constraints in traditional sectors, their impact on household income, and the potential for job opportunities creation underline the necessity for increased investment. The focus is on bolstering employment and household income to inform more effective economic growth policies.
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