McKinsey’s survey sees India’s growth despite pandemic woes

                In the context of both structural growth slowdown and the economic shock of the pandemic, recovering to a high-growth path will not be business as usual for India, 
according to a survey titled India’s Turning Point by McKinsey Global Institute.

 Excerpts from the survey reveal that two sectors - manufacturing and construction - have the potential to give India the biggest lift to productivity and job growth, 
respectively.

In other emerging economies, sectors such as construction and trade typically absorb the greatest numbers of workers moving out of agriculture and increase 
average labour productivity at the same time. 

Indian businesses can create economic value of about $635 billion by 2030 if they tap into the shifting preferences of Indians aspiring to a higher standard of living. 

India has the opportunity to put in place a robust planning approach for its top cities, which have low capital investment per capita and are less productive than they 
should be. India would need 25 million affordable housing units by 2030, at a low cost of at most 2,000 rupees per square foot, depending on income segment.

For example, mass affordable housing that uses modern construction practices, including prefabricated and modular construction and lightweight aluminium formwork 
is five to six times more productive than the sector average and would reduce cost to home buyers. Other opportunities include a planning approach that increases 
the floor space index (FSI) systematically to make the right parts of cities more dense and productive.

India’s maximum FSI ranges from 1.8 to 5 across most cities, while averages are lower as the minimum FSI across cities ranges from 1.2 to 3.5. For a country of 
India’s urban scale, McKinsey estimates that these ideas could generate $195 billion in economic value in 2030 and support about 30 million jobs, for average yearly 
investments of $75 billion.

The construction sector has the potential to more than double its GDP to $550 billion, from $250 billion in 2020. Productive and resilient cities, will require significant 
changes in the real estate sector.

The ratio of home price to income is on average 4.3 in the eight largest cities in India, compared to less than 1.5 in a set of OECD countries.

The higher price of land in India is a large contributing factor and land market reforms would have a substantial impact other sector-specific measures could also help 
boost the real estate sector.

Homeownership could be incentivised by rationalising stamp duties and registration fees to reduce costs to buyers and offering greater tax incentives. The high cost 
of land is a key reason. By enacting several key reforms, India has the potential to reduce land costs by 20 to 25 percent and increase the supply of land available for 
construction.

Finally, the process of land acquisition for industrial use could be significantly eased. Some states have implemented measures like land pooling, enhancing the state 
land bank for industrial use, and introducing legislative amendments to ease the acquisition of land by the private sector, subject to high level clearance. To ease 
conversion of land from agricultural to industrial use, Karnataka has implemented a simplified online, single-window system that requires fewer document submissions 
for land use conversion for industrial purposes. Approval is automatic after 30 days if no response has been received.

Source: Gulftoday.ae