India must focus on building a highly skilled and educated workforce, alongside making substantial investments in critical infrastructure, to achieve its goal of becoming a developed economy, according to Gita Gopinath, the First Deputy Managing Director of the International Monetary Fund (IMF). Speaking at a session with NK Singh, Chairman of the 15th Finance Commission, during the diamond jubilee conference of the Delhi School of Economics (DSE), Gopinath emphasized the importance of education, AI preparedness, and policy reforms in India’s journey toward becoming a developed nation.
Gopinath, who is originally from India, highlighted the need for India to ensure its policies do not inadvertently favor automation, particularly through tax incentives. Addressing concerns about the impact of technologies like robotization and artificial intelligence (AI) on job creation, she stressed the importance of having a workforce that is not only larger but also more skilled and educated. “The depth and quality of education matter significantly for attaining developed-country status,” she said.
In response to Singh’s question about the necessary steps for India to become a developed country beyond achieving higher per capita income, Gopinath pointed out that the average years of schooling in India remain lower than in many other nations. She also noted the critical need for India to invest more in both public and digital infrastructure to bridge existing gaps.
Gopinath also underscored the significance of robust institutions, including an effective judicial system, in supporting India’s development. She identified labor-market flexibility, land reforms, and keeping trade open as key factors for accelerating the country’s progress.
On a lighter note during the discussion, Singh humorously mentioned Gopinath’s past involvement in sports and modeling, to which she responded with a smile, “Because I understand where my comparative advantage lies,” drawing laughter from the audience.
When asked by Hindustan Times about the growing share of capital in India’s GDP compared to labor, Gopinath acknowledged the issue and called for policies that do not penalize firms for hiring. She emphasized the need to address skill-mismatch issues to boost job creation and incentivize states to implement labor codes, which have been stalled in the legislative process. Gopinath noted that India will need to create approximately 140 million jobs by 2030 to meet its developmental goals.
Currently classified as a lower-middle-income economy by the World Bank, India’s path to development will require careful management of its fiscal policies, Gopinath advised. She suggested expanding the tax base, particularly through optimizing the Goods and Services Tax (GST), rather than cutting spending to increase fiscal space. She also pointed out that India’s fertiliser subsidy remains largely untargeted, implying that more effective targeting could help improve the country’s fiscal health.
The discussion also touched on the broader global economic landscape, with Gopinath mentioning the recent evaluation by Singh and US economist Larry Summers on the role of multilateral development banks (MDBs) and funds like the IMF in a changing global economy. She highlighted the significant financing needs of governments, particularly in areas like health and pensions, and the constraints faced by nations in relying on MDBs.
As India continues its journey towards becoming a developed economy, Gopinath’s insights underscore the critical importance of a well-educated workforce, robust infrastructure, and carefully crafted policies that support both economic growth and job creation.
Sources By Agencies
