IMF released a Working Paper titled ‘Advancing India’s Structural Transformation and Catch-up to the Technology Frontier’.
Status of India’s Structural Transformation:
Structural change in output: o Share of agriculture and allied activities in output
- declined from 42% in 1972-73 to 15% in 2019-20.
- Share of industry (consisting of mining, construction, manufacturing and utilities) rose from 24% in 1972-73 to 25.9% in 2020-21.
- Share of services in output rose significantly from 34.5 in 1970 to 55.3% in FY 2020.
Structural change in Employment:
- Share of agriculture in employment declined from 73.9% in 1972-73 to 42 % in 2018-19.
- Share of industry in employment rose from 11.3% (1972-73) to 24% (2019-20) in five decades.
- Share of services in employment increased significantly from 14.8% in 1972-73 to 30.7% in 2019-20
Presence of informal sector: Between 1983 and 2019, the share of the non-farm sector in employment rose 20%, but the majority of such jobs were of the informal variety.
Urbanization: India is urbanizing rapidly. By 2036, its towns and cities will be home to 600 million people, or 40 percent of the population, up from 31 percent in 2011 & 20 % in 1971.
Steps taken for structural reforms in India:
- Tax reforms:
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- Includes Goods and Service Tax and corporate tax rationalization
- Aims to foster competitiveness, address rising inequality, and promote sustainable economic growth
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- Production-Linked Incentive (PLI) scheme:
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- To attract investments in key sectors and cutting-edge technology
- Intended to bring economies of scale in the manufacturing sector
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- Insolvency and Bankruptcy Code (IBC):
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- To improve the credit culture and resource allocation mechanism
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- Labour reforms (four codes):
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- To enhance Ease of Doing Business in the country
- Aims to improve employment creation and output of workers
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- Expansion of country’s digital infrastructure:
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- Examples include Bharat Net, India Stack
- Aims to reduce cost of doing business, formalize the economy, support financial inclusion, and create new business opportunities