Abstract
This research note analyzes the potential drivers of India’s growth for the next decade from 2023 to 2032, namely investment, labour and TFP growth. Using the Long Term Growth Model , built by the World Bank based upon the Solow-Swan growth model, we estimate India can increase its potential growth rate to 6.7% in the base case over the next decade, through a combination of increased labor participation and investment rate. For India to grow at an even faster pace of 8%+ over the next ten years, increasing LFPR and TFP growth is going to be important. According to our estimates, a combination of: a) LFPR and investment rates increasing to previous peak levels, and b) TFP growth rate of 3% (vs. average 2.5% over 2011-19), could together increase potential growth to 8.2% (average) over the next decade.
Figure 1: Improvement in TFP is required to sustain growth rates above 8% for the next 10 years
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