India Needs To Focus On Manufacturing To Achieve 7-7.5 Per Cent Growth Until 2030: CEA Nageswaran

On services sector, he said the composition should change in favour of high value added services as this would improve earnings by attracting foreign demand, said V Anantha Nageswaran

V Anantha Nageswaran said the investment rate (gross fixed capital formation/GDP) needs to increase from 29 per cent to at least 35 per cent.

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Chief Economic Advisor (CEA) V Anantha Nageswaran on Thursday said that India needs to focus on the manufacturing sector to achieve sustained growth of 7-7.5 per cent until 2030. According to a report by PTI, in an S&P Global report titled 'Look Forward: India's Moment', Nageswaran said that India's manufacturing should be a key growth area given the country's comparative advantage in terms of skilled labour, improved physical infrastructure, well-established industrial ecosystem, and large domestic market.

As per PTI report, on services sector, he said the composition should change in favour of high value added services as this would improve earnings by attracting foreign demand. "The Indian economy, in real terms, needs to grow annually at 7-7.5 per cent until 2030... The share of manufacturing in total gross value added has to increase from 16 per cent at present to at least 25 per cent of GDP at the expense of agriculture and low value added services," the CEA said.

Nageswaran added the investment rate (gross fixed capital formation/GDP) needs to increase from 29 per cent to at least 35 per cent. "The private sector, including foreign direct investment, must drive up the investment rate as the government has limited fiscal space," he said.

The CEA also suggested that the key initiatives in this regard should include the development of domestic corporate bond market, and well-targeted fiscal incentives to attract investment. Regarding government investments, he said the focus should be on infrastructure and public goods which in turn would facilitate and stimulate private sector investment.

According to Nageswaran, the net exports need to increase from about (-)3.7 per cent of GDP to a more balanced figure, which can be done by creating a market for high-end manufacturing and high value added services. He also underlined the need for keeping inflation under check. "The government needs to show fiscal prudence with austerity measures. There also needs to be efforts to improve financial inclusion and financial literacy to facilitate the understanding and application of financial instruments in savings and investment decisions," the CEA added.