The three biggest challenges for India's future

India is at a tipping point, both in terms of economic growth and in the human development of its more than one billion citizens. The country is the sixth largest economy in the world, with a GDP of $2.6 trillion in 2017. Its GDP growth rate for 2019 is projected to be almost 7.5%, as it continues to be a major engine of global economic growth. It does this while being the world’s largest democracy and the world’s second most populous nation, with nearly 1.35 billion people spread across hundreds of thousands of large urban centres, small towns and rural clusters.

The World Economic Forum’s Insight Report, “Future of Consumption in Fast-Growth Consumer Markets: India”, in collaboration with Bain & Company, paints a vision anchored in rising incomes and a broad-based pattern of growth and benefit-sharing. India is growing its middle class and lifting nearly 25 million households out of poverty.

While sharing an overall strong positive outlook for the country’s consumption future, the report emphasises how unlocking India’s massive implied economic potential in the future depends on accelerating and sustaining its upward trajectory on key human development indicators and aiming for inclusive progress.

The future presents an opportunity for India to tackle the following three big challenges.

According to the World Economic Forum’s report “The Future of Jobs 2018”, more than half of Indian workers will require reskilling by 2022 to meet the talent demands of the future. They will each require an extra 100 days of learning, on average.

There are four dimensions to the challenge of employment skills. First, the education system focuses on gaining conceptual knowledge, rather than tangible skills which ensure employability. Second, there are more jobs in the informal economy than in the formal economy (80% vs 20%). Third, there are state-level and regional disparities within India in terms of employment opportunities. And fourth, India has one of the lowest participation rates of working age women in the labour force - about 25%.

Looking further ahead to 2030, India will remain a relatively young nation with a median age of 31 years (compared to 42 in China and 40 in the United States) and will have added more working age citizens to the world than any other country. India will gain nearly 10-12 million working age people every year over the next decade, leading to a “working age majority”. Therefore, to ensure the country’s envisioned income growth, and hence consumption growth, massive efforts will be required to provide the right skills and gainful employment, with leadership needed from all stakeholders, including corporates, academia, not-for-profit organizations and government leaders.

Calls for action

To tackle the scale of the challenge, interventions on both the national, state and local levels, including public-private partnerships, will be required to right-skill and/or re-skill both the current and the future workforce. One example is the national Task Force for Closing the Skills Gap in India, launched in October 2018 by the Ministry of Skill Development and Entrepreneurship in collaboration with the World Economic Forum. The task force will bring together leaders from business, government, civil society and the education and training sectors to develop an action plan to address skills gaps in India, by ensuring that education and training systems keep pace with the new demands of labour markets.

By 2030, 40% of Indians will be urban residents. However, there will also be more than 5,000 small urban towns (50,000-100,000 persons each) and more than 50,000 developed rural towns (5,000-10,000 persons each) with similar income profiles, where aspirations are fast converging with those of urban India. The figure below illustrates urban-rural population distribution in India in 2005, 2018, and 2030 projected.

Three critical “access” barriers currently constrain the aspirations of those living in rural areas in India. First, constrained physical connectivity (e.g. access to all-weather roads and electricity); second, lack of digital connectivity (e.g. access to the internet); and third, limited financial inclusion (e.g. access to commercial banks and bank accounts).

While incomes may have begun to rise in rural India, this may not translate into commensurate growth of productivity and inclusion, unless the urban-rural divides are reduced. Given the approximately 60% share of rural population in 2030, this is a critical imperative not only for the government, which serves its people, but also for businesses which are looking for new opportunities and new growth markets in India.

Calls for action

A high priority is infrastructure development, both physical and digital, to enable rural dwellers to access the products and services matching their incomes, needs and aspirations. The government already has flagship programmes such as Digital India, which envisions transforming the country into a digitally empowered society and knowledge economy centred on key programme pillars, such as broadband connectivity and universal access to mobile connectivity, and professed roles, such as “faceless, paperless, cashless”.

With sustained, efficient execution, such innovative programmes in digital and financial areas, along with the proposed improvement of physical infrastructure (road connectivity to nearby urban centres and reliable power supply to all rural households), will be key drivers to ensure inclusive growth in India, truly bridging urban-rural divides across multiple levels.

As India marches forward, it faces new challenges in health and sustainable living, even as it has achieved key health targets such as polio eradication. Cities grappling with alarming rates of congestion and pollution, together with an unhealthy population, could significantly dampen the benefits of India’s demographic dividend and urban growth, and lead to a fast deterioration in the quality of life of its citizens.

Two key challenges must be solved to improve the quality of health and urban liveability for India’s citizens at the macro level. First, while improving overall access to and affordability of healthcare services, it will be crucial to address the advent of non-communicable diseases (NCDs), which currently account for 63% of all deaths in India. NCDs are on the rise, owing to unhealthy food and lifestyle choices, across both urban and rural areas, and across income segments.

Second, the impending crises in air and water pollution, waste management and urban congestion must be urgently solved. As an illustration of the magnitude of just one dimension of the air-water-waste-congestion challenge, nine of the world's 10 most air-polluted cities are in India, including its capital New Delhi.

Calls for action

India has traditionally been a “sustainable and conscious consumption” economy. Working together, business, government and civil society will have to reconnect Indians with their sustainable and healthy roots. Policy efforts will be needed at the highest levels to harmonize India’s growing need for housing, roads, transport services and packaged goods with the resulting impact on the environment. Sustaining economic growth and managing air quality, groundwater reserves and reducing waste will not be a “nice-to-have” option. It will determine the fundamental quality of life of India’s citizens.

As the country enters a new era of envisioned growth, now is the time for all Indians to come together as one and address the most pressing societal challenges facing the country today: skilling and job creation, the socioeconomic inclusion of rural India, and the building of a healthy and sustainable future for every citizen. Collaborative efforts, especially public-private partnerships to address these challenges, can unlock the full potential of a young, progressive and dynamic nation, and establish India as a model for the world’s fast-growing consumer markets.

This blog draws from the Insight Report "Future of Consumption in Fast Growth Consumer Markets: India", published in January 2019 by the World Economic Forum in collaboration with Bain & Company.