Challenges Faced by the Indian Economy

It has been a rather long journey for India. Passing through the stages of pre-colonial prosperity, colonial devastation and major post-independence developments, it has come a long way today, even aiming to overtake China. This journey, however, continues to be riddled with challenges that are still persistent and problems that are still unsolved.

I) Socio-Economic Challenges

Commitment of people to development relies upon their human capital – the information, aptitudes, skills and different ascribes that are important to fiscal development. Poverty restrains economic development, since it branches out to other severe factors such as, illiteracy, unemployment, malnutrition, etc. Poverty is an economic barrier since it produces unskilled labour. Apart from farming, no other low-skilled manufacturing opportunities will open their door to them. As a result, it further depreciates the GDP. Unevenness in shared prosperity is another factor for breeding poverty. Over 30% of the population dwells below the poverty line and there are not many jobs, to narrow down on the same. With massive amount of illiteracy and population growth at the rise further getting us back to square one, excess poverty and unemployment are seemingly inevitable. There is little evidence that anti-poverty programs have yielded the expectations for everyday comforts of the poor, comparable with the critical assets that the nation designates to such projects. In the meantime, a considerable lot of the poorest doesn’t utilize these projects. Thus, rich becomes richer and the poor becomes poorer.

India’s development must be driven by manufacturing, not services, in light of the fact that, among different reasons, work versatility is higher in manufacturing. Likewise, an extensive segment of the work drive has practically zero training, and can’t be utilized in skill-based employments in the administration’s part. Nor would they be effortlessly skilled, given their absence of fundamental education.The quick rate of monetary development has abandoned unskilled workers, and they have attempted to look for some kind of employment in developing ventures. In 2017, the official unemployment rate was simply beneath 5%.

The UN labour report states that Unemployment in India is anticipated to witness minimal increment in the vicinity of 2017 and 2018, flagging stagnation in work creation in the nation. Majorly due to poverty, the man remains unskilled and uneducated which leads him to have narrowed or no employment opportunities. Absence of education significantly restrains the monetary and social advance of a person and additionally that of the nation. Education gives one the ability to look for circumstances and seek after them. Individuals who have gone to class or are accomplished have the aptitude and insight to settle on great venture choices and drive the development plan of a country. Illiteracy, in this manner, thwarts the improvement of the nation. According to census of 2011, literacy rate of India’s is at 74.04%. World Bank considers the immediate and useful connection amongst education and profitability from one viewpoint and education and leading a holistic human life on the other. By taming the labours in skill set and education- it’s a key procedure for advancing national monetary development.

II) Administrative/ Governance Challenges

The problems that continue to lurk inside the backbone of Indian politics and economy- the bureaucracy- hamper India’s growth at an unprecedented scale. Administrative challenges are probably the most important issue that needs to be tackled right away. Some of them are have been listed down below:Corruption levels never seem to come down. With lot of power comes lot of responsibility. Conversely, with lot of money, comes great accountability. However, this doesn’t seem to be the case with Indian politics. Some of the biggest scams that were caught include high level government officials, like Cabinet Ministers and Chief Ministers. Scandals such as 2G spectrum scam (₹1.7 lakh crore (US$27 billion)), the 2010 Commonwealth Games scam (₹70,000 crore (US$11 billion)) and the Coal Mining Scam (₹1.86 lakh crore (US$29 billion)) have accounted for a whopping loss of $20 Trillion to the Indian economy. While the mentality and greed of the people is to be questioned without doubt, some other causes for such high level of corruption include excessive regulations, complex tax and licensing systems, numerous government departments with opaque bureaucracy and discretionary powers, monopoly of government controlled institutions.

Having a population just a 100mn people less than that of China, reports suggest that a handful 1% of the 1.2bn people pay taxes in India. Low levels of tax collection pose a serious threat to the government expenditure in areas such as infrastructure and science & technology as the country continues to remain in a state of fiscal deficit. The problem becomes more severe when the government allocates atrocious amounts on ambitious projects like the bullet train with such limited source of income to the centre.

Although the government seeks to maintain a high degree of rights and protection to labor, the reality is somewhat contrasting as legislative rights only cover a minority of workers. Health, safety, minimum wages are some common challenges faced. Major Labor Laws in India include The Factories Act, 1948; Minimum Wages Act,1948; The Contract Labour (Regulation & Abolition) Act. However, their implementation has received lot of criticism. A 2008 World Bank report claims India’s labour regulations among the most restrictive and complex in the world.

As India prepares herself for becoming an economic superpower, it must expedite socio-economic reforms and take steps for overcoming institutional and infrastructure bottlenecks inherent in the system. Availability of both physical and social infrastructure is central to sustainable economic growth. “We know what has to be done. We have the potential. We have tremendous capability amongst our people. The lacunae or the weakness has always been implementation.”  – Raghuram Rajan said, at the launch of his book “I do what I do” in Mumbai.

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