7

Oct

Challenges Indian Economy  Faces For Sustainable Growth

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Prof. Lallan Prasad

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New Delhi | Monday | 7 October 2024

The Indian economy's growth story is attracting worldwide attention. Charles W.Eliot President Emeritus at Harvard University, a  former Chief Economist of the World Bank has recently described India's economic growth story as 'an economic miracle' over the last generation and has predicted that the next generation between now and the 100th anniversary of India's independence it could grow six-fold from its current level. In the early 1990s India had to put a quantity of gold and ship it to London to secure a 1 billion dollar loan, today it has a foreign exchange reserve of 700 billion dollars. India's GDP growth rate is the highest in the world, much above the United States and most developed countries of Europe, China's 4.6% and world average of 2.7%. The GDP growth rate of the second quarter of the current financial year was 8.2%, higher than the IMF's 6.3%, RBI's 6.5% and Moody's 6.7% estimates. India is on its way to becoming the third largest economy in the world with a GDP of 5 trillion dollars in the next 3 years. It can aspire to become a dollar 7 trillion economy in the next 6 to 7 years as per the document released by the Finance Ministry of India.

 

Article at a Glance
India's economy is experiencing rapid growth, with its GDP growth rate being the highest in the world. The country is expected to become the third-largest economy in the world with a GDP of $5 trillion in the next three years. India is self-sufficient in food production and exports liberally to countries facing food shortages.
Its manufacturing sector is growing, with a high capacity utilization rate. The country has emerged as the second-largest producer of mobile phones and has made significant investments in infrastructure development. However, India faces challenges such as population explosion, depletion of natural resources, and low per capita income.
To address these challenges, the government needs to increase budgetary allocation for health, education, and social welfare, and focus on sustainable development to ensure prosperity for all.

 

India is one of the largest food grains, vegetables, milk, dairy products, and marine goods-producing countries in the world. It's not only able to meet its food requirements internally but also export liberally to the countries facing food shortages. It is the only country in the world providing free ration to its 80 crore people. Its manufacturing PMI was  59 (above 50 indicates growth) hit 16 – a year high in March 2024. The capacity utilization of Indian industries as per the estimate of FICCI, is around 74%. Major industries in terms of value added which have had a high rate of growth in recent years are petroleum products, pharmaceuticals, telecom equipment, aluminium, motor vehicles and cars and electronic equipment. India has emerged as the second-largest producer of mobile phones in a few years. Its infrastructure is rated 7 points out of 10 by CRISIL. Large investments by the Government in building national highways, transmission lines, renewable energy, shipyards, airports and railways have made it possible. Services have been growing at the rate of more than 10% p.a. making substantial contributions to the GDP of the country. India's exports to Europe in value terms which stood at $55.32 billion in FY 21 rose to $98.88 billion in FY24. Major Engineering goods, petroleum products, drugs and pharmaceuticals and electronic goods exports were major exports. The demand for India-made bicycles has surged in the UK in recent years because of Europe's growing health and environment focus. India's overall exports to all countries hit a record $776.7 billion in FY 24 and the overall trade deficit including merchandise and services shrank to $78.12 billion in FY 24 from $121.62 billion in FY23.

 

The progress on the economic front has been spectacular but the challenges are there that policy makers have to take seriously. Sustainable development needs preservation and proper use of resources. India is in the midst of a population explosion. In 1950 India had a total population of 36 crores which has gone up to 144 crores by the end of 2023. In the last 10 years alone more than 25 crore people have been added,17.7% of the world population lives on 2.4% of the land area of India. The density of the population is high- 464 against the world average of 62, as high as 1000 per square kilometre in states like Bihar and West Bengal West. A sharp rise in population has resulted in the diversion of land usage, detrimental to the economy in the long run. The agricultural land area has gone down from 0.48 hectares to 0.15 hectares per person between 1951 to 2011. Natural resources are depleting fast, The Himalayas are bleeding as rightly said by Bahuguna, and water resources are reaching a critical stage as evident by the decline in snow and glaciers and water level and wetlands. Resources like coal and natural gas, minerals and forests are being overused. Extreme weather conditions are causing natural disasters and affecting crops and agriculture production and life and property. Excessive use of chemicals and fertilizers in agriculture is polluting crops and leaving the soil barren. Air pollution levels are high in most cities.

 

Per capita income is very low in India even though it is the fifth largest economy in the world. India ranks 125 in 190 countries in terms of per capita income which is as low as $2410 compared to $76329 in the United States, $48718 in Germany, $34017 in Japan and $12720 in China. Further, the concentration of wealth in India is high. The top one per cent of the population is said to own 40% of the country's wealth. As of July 31 2024, India had 334 billionaires according to the  Hurun rich list 2024. Budgetary allocation in India for health, education and social welfare is extremely low. Most developing countries spend an average of 18% of their budget on health, India spends only around 4% and on education less than 3%. In UNDP's human development score, India ranks 134 out of 191 countries. The unemployment rate is high and jobs are not being created at the same speed at which the population is rising. As the economy is getting capital intensive, production is getting more and more high-tech, and jobs can't be created at that speed which may be possible in the labor-intensive economy, but it is a necessity to industrialize rapidly and compete with the rest of the world to survive and grow which increases the importance of capital and technology. The population has to be, therefore, kept at a reasonable level to benefit from the growth and raise the income and standard of living of the people at large. Budgetary allocation on health, education and welfare has to be increased substantially to usher into an era of prosperity for all.

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