We don’t have the luxury of just pushing manufacturing: Kotak Mahindra AMC's Nilesh Shah

Nilesh Shah. Managing Director at Kotak Mahindra Asset Management Co. Ltd

Could India become the third largest economy in the world by 2028? The broad consensus is yes. But for real incomes to rise, it will take a lot more. According to Kotak Mahindra Asset Management Company's managing director Nilesh Shah and CLSA India’s economist Indranil Sengupta, India could be the first country to grow with services.

The Prime Minister’s ambition of making India the third largest economy in the world is eminently achievable, according to economists. Reports, including the most recent one by the State Bank of India, make the case that even if India continues to grow at 6-6.5 percent, it will become the third largest economy in the world.

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It is currently the fifth-largest economy in the world after the US, China, Japan and Germany. The International Monetary Fund has also said that India will overtake Japan and Germany to reach the third spot in FY28. But increasing per capita income is a far greater challenge.

“Post 1990 we decided to grow the pie, we liberalised ..we have to focus on growing the pie and to ensure that it is equally divided. India has just one problem - that over 20 crore people are employed in agriculture while they should have been employed in services or manufacturing. We don’t have the luxury of just pushing manufacturing,” said Nilesh Shah in a conversation with Moneycontrol.

Talking about the role of pushing services and focusing on building more than one or two sectors in manufacturing, Shah said, “In toys, mobile phones we have become exporters from importers. In the medium-term you have to provide incentives for services to expand.”

The services sector contributed over 50 percent to India’s GDP, according to the Economic Survey 2021-22.

Indranil Sengupta of CLSA added, “Emerging markets grow when they respond to some global need, so India has to focus on services. It will be an exceptional story where an economy grows through services”.

You can watch the full conversation here.