India's Path to a $8 Trillion Economy: Challenges and Digital Potential

India aims for an $8 trillion economy by 2035, but faces challenges like income disparity, informal sectors, and low productivity. Nandan Nilekani's report highlights the transformative role digital infrastructure could play in overcoming these obstacles and boosting economic growth and formal employment.

India is steadily progressing toward its ambitious goal of becoming an $8 trillion economy by 2035. However, according to 'The Great Unlock: India in 2035' report by Nandan Nilekani, several formidable challenges could impede this growth. The report identifies critical issues such as income disparity, lack of formalization, market access barriers, and low productivity as primary hurdles.

The economic growth in India has been notably unequal, with a mere 13 out of the country's 788 districts accounting for half of its GDP. Massive income inequality persists, with the top 10 percent claiming nearly 60 percent of total income. About 200 million workers migrate annually from less affluent areas to economically prosperous regions seeking employment. Alarmingly, India's labor productivity stands at only $7 per hour, a mere tenth of that in the U.S. Moreover, a significant share of the workforce remains trapped in the informal sector.

Currently, just 15 percent of the Indian workforce enjoys formal employment, a stark contrast to nations like Brazil and China. The informal nature of most small businesses (MSMEs) strangles their growth due to limited access to credit. Despite these hurdles, the report remains optimistic, largely due to India's digital evolution. Initiatives like Aadhaar, UPI, and the Account Aggregator system have strengthened digital infrastructure, skyrocketing monthly digital transactions from zero to 16 billion rapidly. Furthermore, AI and Digital Public Infrastructure promise to integrate the next billion Indians into the economy by making digital tools accessible. The report projects that by 2035, half of the workforce will be AI-native, and women's workforce participation will significantly increase. To secure a prosperous future, India must intensify efforts to enhance capital access, aid small businesses, and leverage AI to maximize economic potential.

(With inputs from agencies.)