India needs 8 per cent growth to create enough jobs: McKinsey Global Institute report

The report says that 60 million will enter the workforce based on current demographics, and an additional 30 million could move from farm work to nonfarm sectors.

For representational purposes

NEW DELHI:  India will have to create at least 90 million (9 crore) new non-farm jobs by 2030, and to achieve this target, the country’s GDP needs to grow at 8.0 to 8.5 percent annually over the next decade, said a McKinsey Global Institute report titled ‘India’s turning point’. 

The report comes at a time when CMIE data shows that 19 million jobs have been lost since April and multiple analysts feel that India’s GDP will remain in the negative territory for a substantial portion of the current fiscal year. This, after witnessing a 4.2 per cent mere growth in FY20. 

According to McKinsey, India’s GDP could contract between 3 and 9 per cent in FY21, depending on the effectiveness of the steps taken to contain coronavirus infections and the government’s economic policy responses. It added that if the government does not manage the shock of the crisis adequately, its economy could expand by just 5.5 to 6.0 per cent from 2023 to 2030, with a decadal growth of just 5 per cent and absorb only about six million new workers, marking ‘a decade of lost opportunity’.

The report warned that the economic shock could put the banking system under stress, leading to a rise in bad loans by 7-14 percentage points in FY21 if the financial strain on households, small businesses, and corporations is not mitigated. It also proposed six areas of targeted reform that could raise productivity and competitiveness in the economy. This includes the privatisation of more than 30 state-owned enterprises and channelising more household savings to capital markets.

The report says that 60 million will enter the workforce based on current demographics, and an additional 30 million could move from farm work to nonfarm sectors. If an additional 55 million women enter the labor force, India’s job creation imperative would be even greater. But, the report added that India has a successful track record to draw on.

“Net employment would need to grow by 1.5 perc ent per year from 2023 to 2030, similar to the average rate that India achieved from 2000 to 2012,” the report pointed out. 

5.5-6% growth between 2023-2030 if crisis is not managed 

7-14% expected rise in non-performing assets if crisis worsens