Q: What reforms are needed to bolster inclusive growth for India?

1. Strategy for boosting private sector investment:

• India’s private gross fixed capital formation must accelerate in Machinery &
Equipment and Intellectual Property products so that quality jobs can be created. The
focus of the Government should be on creating an enabling policy and regulatory
environment for the upgradation of capacity and know-how of component
manufacturers, increasing the availability of trained human resources, addressing
resource bottlenecks and regulatory impediments, etc.
• There is significant scope for boosting India’s private investment, especially in the
context of investment requirements facing the Indian economy in the areas of
infrastructure, green transition, etc. The Government of India has undertaken
significant initiatives in this direction, which include Aatmanirbhar packages, the
introduction of the Production Linked Incentive (PLI), investment opportunities under
the National Infrastructure Pipeline (NIP) and National Monetisation Pipeline (NMP),
India Industrial Land Bank (IILB), Industrial Park Rating System (IPRS), the soft launch
of the National Single Window System (NSWS)17, etc.
• The focus needs to be on the implementation of the above measures with a target of
putting the Private Sector Non-Residential Investment (including equipment,
structures, software, and R&D) on a sustainable footing so that it can catalyse the
efforts towards increasing investment to 35 per cent of GDP.
2. Strategy for the growth and expansion of India’s MSME Sector: Strengthening India’s MSME
sector is central to India’s growth in the coming years. MSMEs are the backbone of the Indian
economy, contributing approximately 30 per cent of the country’s GDP, 45 per cent of
manufacturing output, and providing employment to 11 crore of India’s population.
• The Government of India has been proactive in boosting the growth of the MSME
sector, through initiatives such as the allocation of 5 lakh crore Emergency Credit Line
Guarantee Scheme (ECLGS) for businesses, including MSMEs;
• equity infusion of 50,000 crore through the MSME Self-Reliant India Fund;
• New revised criteria for the classification of MSMEs;
• rollout of Raising and Accelerating MSME Performance (RAMP) programme with an
outlay of 6,000 crores over 5 years;
 • Launch of Udyam Assist Platform (UAP) on 11.01.2023 to bring the Informal Micro
Enterprises (IMEs) under the formal ambit for availing the benefit under Priority
Sector Lending (PSL).

These initiatives have been formulated keeping in mind the key challenges the sector faces, primarily
for access to timely and affordable credit. Important though it is, however, financing is only one of the
key challenges that the sector faces.

• For the MSMEs to expand, deregulation is a vital policy contribution. That is why the revival
or creation of institutional mechanisms for dialogue with states on required policy changes is
essential. Physical and digital connectivity (industrial and freight corridors), infrastructure
upgrade and development, the introduction of bullet trains, and the manufacture of
semiconductor chips will contribute to the growth of the sector through the supply-chain
network and the growth of ancillary industries.
• MSME entrepreneurs also need training in critical areas of enterprise management, such as
human resource management, financial management, and technology. These interventions
have to be targeted, tailored to the circumstances of each sector, and practical rather than
academic. The productivity of owner-entrepreneurs unleashed by such training will be
immense.

3. Export strategy is also a crucial component of elevating the manufacturing share of GDP and
growing the country’s MSMEs. For instance, ‘Make in India Mittelstand (MIIM),’ a
collaboration between India and Germany, focuses on driving innovation and enhancing
economic cooperation by encouraging small and medium-sized German companies to
investand manufacture in India. Striking the right balance between the trilemma of trade with
China, investment by China, and India’s territorial and non-territorial integrity and security is
part of the strategy of growing India’s Mittelstand.
4. Strategy for removing the growth impediments in the agricultural sector: Agriculture is at
the nexus of three of the greatest challenges of the 21st century –
• sustaining food and nutrition security,
• adaptation and mitigation of climate change, and
• sustainable use of critical resources such as water, energy, and land.

Agriculture and allied sectors such as horticulture, livestock, fisheries, and dairy and activities such as
food processing hold significant potential for gainful employment. Given the geopolitical and
technological threats that both manufacturing and service sectors face, it makes immense sense to do
whatever it takes to realise the latent employment potential in agriculture.

5. Strategy to secure the financing of green transition in India: Given the climate financing
needs confronting India, there is a need to exploit the rapidly growing pool of global green
capital from sovereign wealth funds, global pensions, private equity, and infrastructure funds.
Ways to do so include:
• addressing barriers to investment in transition projects,
• fostering a sustainable finance ecosystem, and
• diversifying funding sources.

There is also the need for innovative and tailored approaches to effectively channel funds into green
finance

6. Strategy towards bridging the education-employment gap:

• Skill development is at the centre of changes happening in education and labour
markets amid the global megatrends, such as automation, action against climate
change, the digitalisation of products and services, which are changing the nature of
work and skills demands.
• With one of the youngest populations, a median age of 28, India can harness its
demographic dividend by nurturing a workforce that is equipped with employable
skills and prepared for the needs of the industry.
• The National Policy on Skill Development & Entrepreneurship (NPSDE) focuses on
bridging gaps, improving industry engagement, establishing a quality assurance
framework, leveraging technology, and expanding apprenticeship opportunities.
Prioritising equity, it targets marginalised groups and emphasises skill development
and entrepreneurship for women.
• In the entrepreneurial domain, the policy educates potential entrepreneurs,
facilitates mentorship, fosters innovation, enhances ease of doing business, and
promotes social entrepreneurship. This, in combination with the National Education
Policy (NEP), holds tremendous potential for bridging the education-employment gap
in India.
• However, skills are acquired on the foundations built by the education system,
especially at the schools. Therefore, schooling should focus on the basic requirement
of foundational literacy and numeracy and the realisation of grade-appropriate
learning outcomes. The NEP 2020 and NEP 2023 provides a good framework to realise
 this objective. It serves as a stimulus for reforming the educational system to increase
the employability of the future generation
7. Strategy towards building state capacity and capability: Since 2014, India has made
significant strides in delivering crucial infrastructure and implementing direct benefit schemes
aimed at enhancing citizens’ well-being. The civil service has been at the heart of these
transformative efforts. The civil service's ability to design policies and ensure that initiatives
reach all citizens has been critical to the success of these programs. However, sustaining and
accelerating India's progress in the face of evolving challenges requires the state machinery
to reimagine, reinvent, reinvigorate, and re-equip itself.
• Foundational and mid-career training for civil servants in all specialities has to be re-
imagined for the recharging and rebooting of skills, aptitude and attitudes.
• Accountability mechanisms and practices will become necessary, if not already, to
ensure policy outcomes at scale and speed.
• Annual conversations on goals and measurement – at the beginning and the end of
the year – at senior levels will usher in professionalism and accountability.

Prepared by Dr. Saswati Chaudhuri