Investments, Human Capital Formation, and Productivity Growth

The paper aims to study the contribution that increased investment rate, augmented human capital and accelerated productivity growth can make to enable the Indian economy to grow fast enough to reach the upper-income category by 2047. We calibrate, for India, the long-run growth transition from a developing to a developed nation using the World Bank approach to the formulation of a Long-Term Growth Model. A Cobb-Douglas specification of aggregate level production function is used, where the public and private capital stocks have unitary elasticity of substitution. We consider alternate scenarios for investment rate, human capital accumulation rate and productivity growth rate. We find that to realise the vision of Viksit Bharat by 2047, we need the following: (i) the investment rate to go up from 27% to 40%, (ii) the rate of increase in the human capital index to go up from 0.011 to 0.015, and (iii) the annual total factor productivity growth (TFPG) rate increases from 1.3% to 3

Capital Consumption Allowance · Capital deepening · Capital intensity · Human capital · Investment (military · Physical capital · Production function · Productivity · Total factor productivity · Economic Growth and Productivity · Economic Theory and Policy · Indian Economic and Social Development