What the private sector can do for India's economic growth

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The private sector’s role in encouraging a country’s growth and economic development cannot be overstated. Private enterprises are the chief agents in creating employment, providing funds, building competitiveness and driving innovation - all essential instruments for growth.

The private sector, in particular, takes entrepreneurial risks, which is central to how it translates investments into wealth creation and income generation. This role takes on further significance in the current context, as rising uncertainties in a rapidly changing global landscape cause economic growth concerns, particularly for emerging nations.

In the past, India has shown strong resilience in the face of global volatility and has continued to grow steadily, placing it among the world’s fastest-growing economies. The Indian economy grew at a rate of 6.8% during 2018 and is projected to grow at a rate of 7% and 7.2% during 2019 and 2020, respectively. The private sector has played a huge role in India’s development and is largely responsible for the phenomenal growth registered by the country since the economy was opened up in 1991.

The Confederation of Indian Industry (CII) is positioned as a partner in national development and is committed to catalyzing, nurturing and driving enterprise competencies for fostering growth. We do this by strengthening the competitiveness of the economic ecosystem, as well as aligning individual enterprises with the needs of society.

Creating livelihoods

India has entered the 37-year period of its demographic dividend, which means the expansion of its working-age population will last until 2055. With arapidly changing employment landscape, including 11-12 million youth entering the labour force every year, jobs need to be created and effective skills initiatives put in place. The private sector plays a pivotal role in meeting this challenge.

The private sector has strong links to higher investments in education and vocational training to bridge skill gaps in the economy, facilitating skills and training programmes, creating partnerships with educational institutes and experts and, most importantly, creating a future-ready and talented workforce. India has more than 900 universities and 39,000 colleges of which 78% are privately managed. In addition, most large, private enterprises have created in-house training and skills programmes to help build the capacities of young workers in line with industry needs.

CII's skills and livelihood initiatives aim to build an environment that boosts employability. Aside from its policy advocacy work, CII actively engages in training and increasing the skills of young individuals and offers career matching and counselling through its Model Career Centres (MCCs). Its various initiatives have an impact on an estimated 1 million-plus young people every year.

Driving investments is vital

Private investments by the corporate sector are critical to higher growth rates and economic development. More investment creates a multiplier effect in the economy by generating both direct and indirect employment, boosting consumption and fostering further development.

The total gross capital formation in India as a proportion of GDP during 2017-18 stood at around 31%. The private sector, including small enterprises in the household sector, accounted for about two-thirds of this. Effective partnerships between the government and private sector in critical areas of infrastructure and long-term investments would expedite development.

Public-private partnerships need to channel private sector funds into crucial areas of development. The Indian government has introduced various formats in order to attract private investments, especially in roads and highways, airports, industrial parks and higher education and skill development sectors.

Making use of technology

With the advent of the Fourth Industrial Revolution, India is at the cusp of a technology revolution that could transform manufacturing and industrial production in the country. An important objective for the private sector must be to facilitate the transfer or spread of new technology through industry-led initiatives or by building new business models that employ technology in new ways, which in turn will increase productivity and lead to sustainable economic growth.

The private sector has the power to harness and use technology to unleash greater prosperity for the nation, but it is also responsible for ensuring that the benefits of technology reach all sections of society. A focus on affordable technology to allow equal access is imperative for inclusive development. Technology-enabled development in sectors such as health and education go a long way in ensuring equitable development in emerging economies, which the private sector is best equipped to provide.

Fostering entrepreneurship and innovation

Corporates are integral to fostering innovation and entrepreneurship and ensuring the future progress of an economy. Private sector investments provide necessary infrastructure that is sustainable, reliable, and can use modern technology to create new products and services. In most countries, the private sector plays the lead role in research and development spending, working with universities and institutions to translate new research into markets and crafting innovative business models and strategies.

India has emerged as a significant player when it comes to converging technology and entrepreneurship. It is the second-largest start-up nation in the world, with more than 14,000 start-ups recognized under the Startup India scheme. CII has led initiatives to boost innovation in the country and encourage young entrepreneurs, including the CII Startups Coalition and CII Startupreneurs which connect new entrepreneurs, investors, mentors and service providers.

Environmental efficiency

Scarcity of natural resources and environmental degradation pose major threats to sustainable growth. Engaging the private sector has become critical to ensuring environmental efficiency through its greater adoption of cleaner, greener technologies and the adoption and sharing of best practices. The private sector’s use of new technologies in sustainable production, while coming at some cost, will promote sustainability, efficiency and better use of inputs and raw materials.

Green growth and climate change action require significant financing and investments. The private sector should lead from the front and enable more innovation and mobilization of resources, for example, the funds, budgets, communication systems and necessary infrastructure, which are essential for ecological as well as economic sustainability.