The productivity and skill level of its workforce is even more critical as India charts its course for the future, he said.
Citing the example of China, Bill Gates said that research has shown investments in fundamentals like health and nutrition accounted for almost 40 percent of China's phenomenal growth since the 1970s.
"Lost productivity is lost potential in future and the fact that malnourished Indian children perform two-to-three times worse than their adequately nourished peers underline the need for investing more and more in the health, sanitation and skilling of Indian workers and children," he added.
Bill Gates also hailed the recent economic reform of GST as fantastic.
Gates was participating in a panel discussion on 'Human Capital, Growth and Public Policy', organised by the Observer Research Foundation and the Bill & Melinda Gates Foundation.
Principal Economic Advisor Sanjeev Sanyal also said in the event that Government will bring out new urban policy next year.
"In the next decade India will witness the world's biggest urbanisation and the Government would be bringing out a new urban policy early next year which will factor in all aspects making it a comprehensive document," he said.
He also underlined the need for improving our municipal services which in turn will help improve the life of the people. "We need to work very hard on this," he emphasised.(ANI)