At the World Economic Forum’s India Economic Summit this past week, the new Modi government was under particular scrutiny. But as the event concluded, it was clear that most participants were bullish about India given the actions that the government is proposing—with a note of caution, though. With the government now six months in, reforms seem to be slow in coming—and that could be a problem.
The thing is, there’s a lot to be done in order to meet the potential the world is seeing in India right now. A major challenge is the employability of the Indian working population. With one million workers set to enter the job market every month as India’s under-25 population comes of working age, creating jobs is paramount. But India, like much of the world, is experiencing a talent paradox: 60 percent of India’s total population is available for work, but only 25 percent is capable of being used by the market. How to address this issue was the topic of a session I moderated last week at the summit. Of the many solutions put forward, several proposals the Modi government is seeking to implement were discussed and applauded.
But employability is just a start—to create jobs India must improve its competitiveness overall. With the right policies in place, employability and skills can straightforwardly be improved. But items like infrastructure are long-term investments and are critical to moving raw materials and resources as well as bringing in the FDI needed to boost manufacturing. According to Deloitte Global’s report, Competitiveness: Catching the next wave in India, clearing up bottle-necks in construction projects—some of which the Modi government has already taken action on—will be critical to improving growth.
Creating a pro-business environment will also play a role. India dropped in the World Bank’s latest Doing Business Index, released two weeks’ ago, slipping to 142—the lowest among the BRICS. While this is a lagging indicator and will most likely improve next year, regulation, taxes, and labor laws all need reforming if “doing business” in India is to improve. The most competitive countries in the world, according to the 2014 WEF Competiveness Index—Singapore, Switzerland, and the United States—all rank in the top 20 on the World Bank index. With that in mind, Modi has vowed to move India into the top 50 of the index.
With promises like this, Modi is clearly putting the world on notice that India is getting ready to take its place as a leading economy. And if the WEF summit last week is any indication, the world is eager to be a part of that journey. But as one speaker at the event’s closing plenary commented, there won’t be a big bang in India; rather reform will come in increments. The question is, will the world wait?
Gary Coleman is Managing Director, Global Industries, of Deloitte Touche Tohmatsu Limited. He is a member of Deloitte’s Global Markets Committee and is the lead partner in Deloitte’s strategic relationship with the World Economic Forum. Follow him on Twitter @gcoleman_gary.