New Delhi :  India’s economy must grow at a pace of 8-10 per cent per annum over the next ten years to fully capitalise on its favorable demographic dividend, according to the Reserve Bank of India (RBI).

In its latest monthly bulletin, released on Tuesday, the central bank emphasised that achieving India’s developmental aspirations through 2055 hinges on this elevated growth trajectory during the ongoing period of demographic dividend that commenced in 2018. 

Conditions are ripe for India to extend its recent run of real GDP growth exceeding 8 per cent during 2021-24, the RBI noted.

An SBI report projects India’s GDP growth for the current fiscal year to approach 8 per cent. However, the RBI cautions that India’s development strategy must laser-focus on maximising the contribution of its young, expanding labor force to drive productivity gains. Leveraging this demographic bonus is critical for India to escape the middle-income trap.

With the working-age population projected to swell by 9.7 million annually through 2031 and 4.2 million per year in the subsequent decade, enhancing labor quality will be paramount, the bulletin stated. Although labor quality growth has been sluggish historically, there are signs of improvement since 2017-18.

RBI Deputy Governor Michael Patra highlighted India’s “striking” demographic contrast with an aging world, underpinning the country’s multi-decade growth runway. 

However, the RBI warned that extreme weather events, geopolitical tensions roiling oil markets, and food price uncertainties pose risks to the disinflation process. Securing enduring price stability remains crucial for sustained high growth.