India's 6.5% growth falls short of 8% needed for prosperity, committee finds

Who it concerns: The report concerns the Ministry of Finance and the broader Indian economy, affecting sectors including manufacturing, MSMEs, agriculture, banking, infrastructure, and energy.

What the committee found

• The Committee noted that India needs 8% real GDP growth annually for a decade to achieve sustained prosperity, requiring investment as a share of GDP to rise from 31% to 35%.
• For manufacturing, the Committee recommended enhancing competitiveness, increasing R&D investment, negotiating trade agreements, expanding PLI scheme support for high-tech sectors, and diversifying the investor base for FDI.
• For MSMEs, the Committee recommended promoting digital credit assessment, deepening credit penetration in underserved regions, scaling digital tools for market linkages, simplifying disclosure norms for listed MSMEs, and prioritizing labour-intensive MSMEs for employment.
• For agriculture, the Committee recommended promoting crop diversification, strengthening supply chain infrastructure, and encouraging private sector participation in agri-tech to target supply-side inflation and boost farmer incomes.
• For price stability, the Committee recommended strengthening supply chains via cold storage and digital market linkage, implementing regulatory reforms from the Union Budget 2025-26, and simplifying compliances under the Jan Vishwas Bill 2.0.
• For the banking sector, the Committee highlighted the structural challenge of credit growth outpacing deposit growth and recommended encouraging deposit mobilisation, strengthening risk management, and extending stress testing to NBFCs and cooperative banks.
• For infrastructure, the Committee recommended boosting capital expenditure while maintaining fiscal discipline, addressing challenges like high logistics costs and environmental clearance delays.
• For energy transition, the Committee recommended accelerating investments in diversified renewable energy, strengthening mineral supply chains, and promoting the transition to electric vehicles.

Also in the document

• India’s real GDP growth rate for FY 2024-25 is estimated at 6.5%, below the 8% annual growth rate the Committee states is required for sustained prosperity.
• India currently holds a 2.8% share in global manufacturing.
• Gross non-performing assets of Scheduled Commercial Banks were at a 13-year low of 2.5% as of December 2024.
• The Committee identified that bank credit growth is outpacing deposit growth, posing medium-term liquidity risks and high funding costs.