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India needs to improve on reducing regional inequalities and invest in human capital in order to become a developed country by 2047, AMIYATOSH PURNANANDAM, economist, University of Michigan, says in an interview with Ruchika Chitravanshi in New Delhi. He adds that the government needs to incentivise good long-term risk taking by banks to push private investment. Edited excerpts:

- Ruchika Chitravanshi

India wants to become a developed country by 2047. Are we on the right track?

You need about 7-8 percent growth rate for the next 25 years. And there's of course a whole lot of uncertainty. That will be very hard to give one precise answer. The infrastructure reforms undertaken are certainly in the right direction. This is because the return on infrastructure comes for a long period of time. What we lack, in my opinion, is fundamentally two things: one, investment in human capital. There's a whole lot of focus on investment in physical capital - which is great, you need that. But human capital is still lacking. And second, regional inequality is going to be a big make or break. If you look at people from Bihar, Jharkhand and eastern Uttar Pradesh, there's a massive inequality. How do you bring that part of your country up?

Growth has been driven by public sector expenditure. So, what is it that we need to improve the performance of private investment?

You had good private investments till 2007 and 2008. A lot of that investment was on the back of bad loans that were discovered later. When we cleaned up the banking sector, the hope was that private investments would pick up. When you improve the banking sector's non-performing assets (NPAs), sometimes banks become too risk averse. But then you are not making productive investments. So, we need to incentivise good long-term risk taking.