India needs additional reforms to realize a more balanced growth through manufacturing boost, said Dharmakirti Joshi, chief economist with Indian leading credit rating and research body CRISIL Limited.
India now requires a manufacturing boost to provide huge job opportunities to its great pool of young laborers, Joshi told Xinhua in an interview last Friday.
Indian economic growth is mainly driven by service sector and internal consumption and hasn't experienced manufacturing boost when India morphed into a service-based economy from one relying on agriculture in the 2000s.
India now faces challenges such as weak infrastructure, high inflation especially high food prices and shortage of qualified labor force, said Joshi.
High food price inflation will hurt people despite income increase and will be the major challenge in the next decade, according to the economist.
Going ahead, lack of skillful labor will be a big problem and both high and low skill training shall be in place for potential workers in mining and other fields.
"Until we create good infrastructure, we can not improve industry sector, which needs support from infrastructure," said Joshi. And now the improvement of infrastructure is not happening in a big way.
India needs to lift the share of industry in overall GDP, which is standing at 20 percent now, improve investment especially in the infrastructure sector and increase agricultural productivity through better irrigation system, high quality seeds and better technologies, said Joshi.
Efforts also have to be made on education including participation of private sectors, since the government alone can't contribute all of the work, added Joshi.
Indian government has the consensus to push ahead more reforms and the Planning Commission has set up a task force to prepare a manufacturing policy paper, Joshi said.
Joshi said, the policy paper will create better environment for the development of Indian manufacturing industry with proposed building of infrastructure and investment zones and modifications of labor laws.
India has to inject more flexibility to labor laws and give top priority to agricultural reforms, which could lead to lower inflation, said Joshi.
Reforms are required in the financial market so as to generate more revenues like development of the bond market for financing since most of the financing is concentrated on the banking sector, according to Joshi.
Moreover, India also needs to attract more capital especially foreign direct investment (FDI) by opening up more sectors.
The government has to provide training first and then provide job opportunities to the people, said Joshi, noting manufacturing is the most labor-intensive sector after agriculture.
"It will be a great achievement if the share of manufacturing in GDP rises to 25 percent by 2025 and the share of agriculture will keep going down at around 3 percent of annual growth," said Joshi.
Joshi predicted that India won't turn into an export-oriented country and the share of industry in GDP will reach 35 percent in 30 years, despite insignificant growth of export in the last couple of years./.