Structural Change Forecasts for India: How Big of a Bang Can a Big Bang Have?
India’s political environment exhibits a new determination to “transform India into a global manufacturing hub,” and in the process raise manufacturing to 25% of GDP and create 100 million new manufacturing jobs. This would entail a structural change comparable to that witnessed by several East Asian countries beginning in the 1960s. The study projects a formal-sector manufacturing boom out 20 years at the sectoral level, assuming India can make the necessary reforms to initiate such a boom. Projection parameters are carefully constructed based on Indian and East Asian historical experience. The projections break out the key growth areas of formal-sector manufacturing and modern services to capture their unique characteristics. The results show large positive gains to aggregate output and employment from initiating an East Asian-style manufacturing boom in India. Reflective of the small size of formal-sector manufacturing employment currently, the government’s specific employment goals appear unattainable in the next 20 years.