NEW DELHI: Average GDP growth rate of 12.2% is needed to start addressing India’s underemployment challenge and a bigger push is needed for a pro-growth, pro-jobs policy agenda to tackle the country’s high youth unemployment problem, a report by investment banking and financial services firm Morgan Stanley has said.“In our base case, India’s GDP will grow at an average of 6.5% over the coming decade, one of the fastest-growing economies globally. But this pace will not be enough to generate enough jobs,” said the report, asserting growth momentum needs to be stronger.The report said to achieve higher growth, India needs stronger growth in its industrial and exports sectors. “Studies have shown that every job created by manufacturing exports creates two other jobs in related sectors like transportation and logistics,” it said.“In this sense, India has significant scope to increase its market share in exports because it is still just at 1.8%, well below its weight in terms of working age population and GDP,” it added.The report said policymakers are already making efforts but the magnitude of the jobs problem means there is a need to accelerate pace and do more.“A comprehensive reform package will be needed, including accelerated build-out of public infrastructure, especially for last-mile connectivity, plus a systematic approach that incentivises state govts to improve the business environment and ensure the labour force is adequately skilled,” the report further said.It said over the medium term, one pressing issue is that AI will reduce job growth prospects, particularly for IT services sector — which has been a key source of employment creation — and for the domestic services sector as well.It said Asia’s youth unemployment is high and underlying situation is worsening. Slowing growth adds to the cyclical challenge; AI and automation are structural headwinds. Policymakers must either make reforms to shift growth models or redistributive efforts to manage potential social stability risks.