What Happened
- A major professional services firm released a report titled "Top 10 Priorities for India's Next Growth Phase," outlining a coordinated execution agenda for achieving Viksit Bharat (developed India) by 2047.
- The report emphasises that India must transition from growth at scale to productivity -- from assembly to manufacturing depth, from infrastructure creation to logistics efficiency, and from enrolment to employability.
- Key priorities include manufacturing competitiveness, building a future-ready workforce, MSME strengthening, urban transformation, and trade diversification.
- With India's median age at 28 and working-age population projected to exceed 1.13 billion by 2050, the report calls for operationalising the National Education Policy (NEP) and scaling re-skilling in AI and digital technologies.
- Manufacturing remains at approximately 17% of GDP despite recent gains in electronics and engineering exports.
Static Topic Bridges
Total Factor Productivity (TFP) and India's Growth Model
Economic growth can be driven by factor accumulation (more capital and labour) or by Total Factor Productivity (TFP) -- the efficiency with which inputs are used. India's growth since 1991 has been predominantly capital-driven (high investment rates of 30-33% of GDP) rather than TFP-driven. TFP growth in India has averaged approximately 1.5-2% annually, compared to 3-4% in China and East Asian economies during their high-growth phases. For India to sustain 7-8% GDP growth until 2047, TFP must contribute a larger share, requiring improvements in technology adoption, institutional quality, infrastructure efficiency, and human capital.
- India's GDP growth (2024-25): approximately 6.5%; Investment rate: approximately 31% of GDP
- TFP contribution to India's growth: approximately 25-30% (compared to 40-50% in East Asian miracle economies)
- Solow Growth Model: long-run growth driven by technological progress (TFP), not just capital accumulation
- India's labour productivity: approximately $10,500 per worker (PPP, 2024); China: approximately $25,000; US: approximately $150,000
- Incremental Capital-Output Ratio (ICOR): India at approximately 4.5 (higher = less efficient use of capital)
- NEP 2020: targets 6% GDP expenditure on education (current: approximately 4.6%)
Connection to this news: The report's central thesis -- transition from scale to productivity -- directly addresses India's TFP challenge. Without this transition, India risks a middle-income trap where growth slows as easy gains from factor accumulation are exhausted.
MSME Sector -- Scale, Challenges, and Policy Framework
Micro, Small, and Medium Enterprises (MSMEs) form the backbone of India's economy, contributing approximately 30% to GDP, approximately 45% to manufacturing output, and approximately 48% to exports. The MSME sector employs over 110 million people. However, Indian MSMEs face challenges of low productivity, limited technology adoption, credit constraints, and informal operations. The MSME Development Act, 2006 (amended 2020) provides the legal framework, with revised classification based on investment and turnover criteria.
- MSME classification (revised July 2020): Micro (investment up to Rs 1 crore, turnover up to Rs 5 crore); Small (up to Rs 10 crore / Rs 50 crore); Medium (up to Rs 50 crore / Rs 250 crore)
- Total MSMEs: approximately 6.3 crore (63.4 million units); 99% are micro enterprises
- Employment: over 110 million people; largest employment generator after agriculture
- Credit gap: MSME credit demand estimated at Rs 69 lakh crore; formal credit availability: approximately Rs 22 lakh crore
- Key schemes: CGTMSE (collateral-free loans), PMEGP (employment generation), Champions Portal, Udyam Registration
- Productivity gap: Indian MSME labour productivity is approximately 20-25% of large firm productivity
Connection to this news: The report's emphasis on MSME competitiveness addresses a critical bottleneck -- unless India's 63 million MSMEs upgrade technology, formalise operations, and integrate into global value chains, the manufacturing GDP target of 25% will remain elusive.
Demographic Dividend and Human Capital Development
India's demographic dividend -- a large and growing working-age population (15-64 years) relative to dependents -- provides a potential growth advantage. India's median age is 28 years (compared to China's 39 and Japan's 48), and its working-age population is projected to peak at approximately 1.13 billion by 2050. However, a demographic dividend is not automatic -- it depends on creating adequate employment and developing appropriate skills. India's labour force participation rate (LFPR) remains low at approximately 56% (PLFS 2023-24), with female LFPR at approximately 37%.
- India's population: approximately 1.44 billion (2025); working-age share: approximately 67%
- Demographic dividend window: approximately 2020-2055 (before ageing sets in)
- LFPR (PLFS 2023-24): approximately 56% overall; male: approximately 75%; female: approximately 37%
- Youth unemployment (15-29 years): approximately 10% (PLFS 2023-24)
- Skill India Mission: launched 2015; target to train 400 million people by 2022 (revised)
- NEP 2020: multidisciplinary education, vocational integration from Class 6, National Credit Framework
- Apprenticeship-linked degrees: under NEP's Academic Bank of Credits system
Connection to this news: The report's call for operationalising NEP, expanding apprenticeship-linked degrees, and scaling AI-enabled re-skilling directly addresses the risk that India's demographic dividend becomes a demographic disaster if the workforce lacks the skills demanded by a productivity-driven economy.
Key Facts & Data
- India's median age: 28 years; working-age population projected to exceed 1.13 billion by 2050
- Manufacturing share of GDP: approximately 17% (target: 25% under Make in India)
- MSME contribution: approximately 30% of GDP, 45% of manufacturing output, 48% of exports
- MSME employment: over 110 million people
- India's labour productivity: approximately $10,500 per worker (PPP)
- LFPR: approximately 56% overall; female: approximately 37%
- Viksit Bharat target year: 2047 (centenary of independence)