Consulting firm McKinsey India on Thursday said corporate tax rate cut by the Narendra Modi government is a good move and is a step forward to the $5 trillion economy.

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In an interview to CNBC-TV18, Gautam Kumra, managing director, said, "Achieving $5 trillion economy is a noble objective and getting that is not going to be trivial but I think it is a worthwhile objective. I would examine this from productivity and job creation lines. If you think about $5 trillion or talk about being the third-largest economy by 2030, you are talking about 8.5-9 percent economic growth rate and that in our mind comprises about 1.5 percent in employment growth and about 7.5 percent in productivity growth."

Kumra said manufacturing of electronics is the immediate opportunity for the country to add $0.5 trillion to India's economy by 2030, "If you think about productivity, it is not possible for our economy to deliver 7.5 percent productivity gain unless we actually shift manufacturing by at least 5 percentage points from 17 to 22."

On the role of jobs in $5 trillion economy, he said, "The blessing we have is, we have a large workforce and it is going to only increase. Unlike China, we are going to continue to see the increase in the workforce coming into the working population. Our sense is that if you want to keep the unemployment rate under 3 percent, we need to create about 120 million jobs over the next decade. So, you are talking about 12 million jobs a year and we would need to move about 40-50 million people from agriculture into higher productivity jobs. So, net creation of about 80-90 million jobs."

"If you think about where will this happen, our sense is there are 2-3 big-ticket items. Number one, I think after agriculture, the single biggest job creator is the construction and real estate sector. This sector has the potential to add about 40-50 million jobs over the next decade. However, it needs massive rethinking on land reform, tax reform, FSI deregulation, technology infusion and so on."

First Published:Oct 3, 2019 8:39 PM IST