High growth cannot be sustained till India makes adequate investments in infrastructure

The Centre has to work closely with states similar to GST council for achieving higher growth. The massive mandate of the new government will help such coordination.

NSS employment data shows that the shares of agriculture, industry and services in total employment were 44 per cent, 25 per cent and 31 per cent respectively in 2017-18. (C R Sasikumar)

India’s GDP growth rate slowed down to 5 per cent in Q1 of FY20 and is expected to be around 6 per cent or below in this financial year. As former Reserve Bank of India governor Y V Reddy mentioned recently, a combination of cyclical and structural factors have been responsible for the slowdown. One example is the auto sector. There seems to be a collapse of aggregate demand in the economy. Global uncertainties have added to the problem. In the last few weeks, the government has announced several measures to improve both consumption and investment in different sectors and for the economy as a whole. The announcement of reduction in corporate tax rates announced on Friday may help in reviving the sentiments of the private sector but the tax revenue may also decline and put pressure on fiscal deficit. These stimulus and structural measures and monetary policy may help reviving the economy to some extent in the near future. But, these measures alone may not help in getting higher growth. The Chief Economic Advisor also mentions that we need long-term structural reforms for investment-led growth. Among other things, we need to focus on three structural issues: Physical infrastructure development, raising human capital and revival of rural economy for a long-term growth of 7 to 8 per cent and attaining $5 trillion economy by 2024.