As India celebrates the 76th anniversary of her independence, she has been capturing global attention due to its rising economic power. To put things in perspective: it took India 60 years from its independence in 1947 to become a $1 trillion economy while it took just 7 years to add an additional one trillion to become a $2 trillion economy by 2014 and is now a $3.4 trillion economy, last year.
India is now the most populous nation on the planet and the fifth largest economy. As evident, much has been achieved while much more needs to be done on various fronts. We would like to highlight the current and the future challenges facing India’s long march towards becoming a developed nation by 2047.
Socio-economic challenges
India has been able to achieve many socio-economic developments over the past years. Moving 250-300 million Indians out of absolute poverty is no small feat. However, the majority of Indians still live on low incomes. Poverty in India has declined from 74% in 2004 to 26.5% in 2020 measured at $3.2/day. However economic growth has not led to economic equality.
There are socio-deep economic divisions within and between the population, regions, and states. The gaps between rich and poor, urban vs rural India, northern vs southern states etc. is alarming. If we see the wealth share, the top 1% account for 40.6% of the country’s wealth. The number of Indian billionaires grew from 102 in 2020 to 142 in 2021, the worst year yet for India during the pandemic.
This was also the year when the share of the bottom 50% of the population in national wealth was a mere 6%. The richest 98 Indian billionaires had the same wealth (USD 657 billion) as the poorest 555 million people in India, who also constitute the poorest 40%. Despite formalization of the economy gathering pace, the informal sector continues to employ about 80% of India’s labour force and produces 50% of its GDP. Government needs to do more to uplift millions of people at low incomes beyond the food and fuel subsidies.
Unemployment: A major concern
The country is seeing a decent growth rate, but this growth is not creating enough jobs. India’s unemployment rate is around 7.7% in May 2023. While the youth unemployment workforce who are aged 15 to 24 years is three times higher at 23%. This is of grave concern as India has one of the youngest populations in the world with a median age of 28.7 years and having 65% of its population below 35 years of age. Simply put, there are not enough jobs to support the growing number of workers in the country. India therefore sits on a ‘demographic time bomb’ which could cause social unrest in the country.
Estimates suggest that India needs to create 1 million jobs every month. In addition, the government is focusing on job creation through various public policy programs such as ‘Make in India’, ‘Skill India’ and ‘Start-up India’ with its major aim being promoting labour intensive manufacturing, giving skills and training to the youth as well as creating an entrepreneurial ecosystem for new companies. The silver lining therein is that youth is also looking at entrepreneurship and start-ups to earn livelihood and in turn are becoming ‘job creators’ as opposed to job seekers.
Sectarian violence at a few places are also on rise. There is also rising religious fundamentalism in certain sections that are creating a stress on the social and religious harmony of the nation. The recent riot in Haryana also reflects on the same.
However, the government has identified five critical 5D’s for business to thrive in India. These being Demography, Demand, Democracy, Deregulation, and Digitalization. Special attention has been given to three specific areas. First, the ‘financial inclusion program’ under which more than 400 million Indians opened a no-frill bank account giving them access to banking services – making it the largest financial inclusion program in the world. Second, focus on the manufacturing sector through the ‘Make in India’ initiative to promote the country as a preferred global manufacturing destination and attract investments and know-how. Third, ‘digital India’ program to make all citizens digitally literate and bring internet and e-governance to all sections of the society.
Over the past years it has given thrust on information, communication, and technology (ICT) as well as the digital ecosystem. This can be a strong point for the economy. The idea is to use ICT to leapfrog in terms of public services, governance and address leakages in government schemes or programs. This can tackle issues related to accessibility, inclusion, transparency, and accountability. This coupled with improving the hard and soft infrastructure for the education sector could be a game changer for the economy.
In nominal GDP figures, India already surpassed France and UK to become the 5th largest economy, while on PPP terms it is the 3rd largest economy, behind China and the U.S.
Several factors support India’s trajectory to become the third largest economy by the end of this decade. But to do so in an inclusive manner, it needs to stress on the three key areas. First, increase the female labour force participation in its economy. India has just over 19% of women (aged 15-59) being part of its labour force in 2022. This is much lower than the world average of 47%. It will help in dramatically increasing household incomes, spending and saving and usher in greater women empowerment and reduce gender gaps in the country.
Second, reduce poverty, and address deep economic inequalities prevailing between rural and urban India. This is particularly worrying as economic inequality is prevalent in a society that is already fractured along the lines of caste, ethnicity, religion, region, and gender. Third, focus on the youth of the country by investing in the quality of education and infrastructure around it, stressing on employment and job creation, and enabling a start-up and entrepreneurial ecosystem in the country. Getting employment is one thing but getting an employable labour pool is another challenge for the country.
To conclude, as India enters its 77th years of independence, it needs to chart out a roadmap for the next 25 years envisioning a developed nation by 2047. We aspire that the ‘re-emergence of India’ that for most of human history was one of the oldest and leading civilizations will be beneficial not only for its citizens, but also for the global community.
By Dr Mohit Anand & Rajesh Mehta
https://thesouthasiantimes.info/indias-vision-for-2047-on-77th-independence-day/
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