The Indian Future: The Main Economic Issues India Needs to Solve to Become the Third Largest Economy

India has shown good growth progress in the past 2 decades. From taking 60 years since independence to reach the $1 trillion mark to achieving the next trillion in just 7 years and the following in just 3, the Indian growth progress has shown no signs of a slowdown until the COVID pandemic ravaged the world. Even after the pandemic died down, while many countries have struggled to maintain pre-covid growth rates, India has managed to fare much better. Industries have continued to grow with some like the automotive industry reporting all time highs.

Even among all these highs, India still suffers from various flaws and issues that have embedded their roots in the Indian economy and society. These issues have to be resolved in order for India to become the 3rd largest economy in the world.

Government Spending

The Indian administrative system faces a severe debt crisis. Governments at every level, be it Centre or State, are under massive debt burden. While it is perfectly normal for governments in developing nations, like India, to be under debt, the issue arises when one looks at the spending patterns of the governments. 

One of the most recent examples can be seen in the Indian state of Madhya Pradesh. The BJP state government, led by Chief Minister Shivraj Singh Chauhan, has initiated the Ladli Behna Yojna, under which approximately 1.25 crore (12.5 million) women will be given Rs. 1,000 every month. The government plans to gradually raise this amount to Rs. 3,000 (already raised to Rs.1,250). Thus the estimated annual expenditure of the government at the current distribution amount of Rs.1,250 comes out to be Rs. 18750 crores (Rs. 187.5 billion). Such policies are being undertaken at a time when the state is already under a massive debt of Rs. 3,31,651.07 crore (Rs. 3,315.61 billion). Such schemes, related to freebies or subsidies are prevalant in almost all states across the country, albeit to different levels. 

Although these policies are advertised as moves to uplift the backward sections of the society, they fail to realise these objectives. Providing freebies leads to fall in the workforce at the lower levels as people start to prefer leisure over work. This mostly effects labour supply in areas such as agriculture, where the wage is not very high. Additionally, many times the money given to these households are spent on intoxicating substances like liquor or cigarretes. This reduces productivity instead of increasing it.

Brain Drain

India has become one of the largest exporters of human resources to the rest of the world. As of 2020, India had the highest immigrant population compared to any other country as shown by a report by Economic Times. An estimated 2.5 million Indians move overseas every year and this figure is continuously expanding. According to the Expat Insider 2021 survey by InterNations, of the total Indians emigrating from India, 59% do so for career related reasons, 11% for education and 7% for better quality of life. The average age of Indian expats was reported to be 38.7 years. These numbers are extremely concerning for the Indian economy. 

The Indian Education System

The Indian education system lays extreme importance on academic development instead of skill development. Students are pressured to score high marks rather than understand the core concepts of their studies. Moreover the "reservation system", which is a hotly debated and controversial area, needs reforms in order to make it more feasible for modern times. The extreme competition for education opportunities as one progresses to higher levels in addition to the lack of sufficient educatonal institutes in the country have hindered the development of a large part of the Indian youth. 

Urban Planning

Urban planning in India is in need of serious reform. Almost all Indian cities suffer from haphazard planning and development. Firstly, haphazard and unscientific urban planning has been the cause of many environmental issues like severe air pollution, fall in ground water levels, etc. This is because such construction has led the land to be covered by a sprawling network of cement structures that block the water from seeping into the ground. In addition, because of such planning, the tree count in urban areas has been declining, giving a boost to air pollution. Secondly, lack of proper drainage facilities, and poor urban planning has made most cities vulnerable to flooding in times of excessive rain. 

In addition to this the various local bodies do not coordinate their activities leading to massive overspending on local development and maintenance projects. The cost of these projects can be significantly reduced if the various departments of the local and state government coordinate their development plans with each other. It is a regular occurance in Indian cities to see road maintenance being completed just in time for it all to be uprooted in order to perform maintenance on the sewage or water supply lines. This type of mismanaged and unplanned project execution is responsible for a lot of unnecessary spending as well as inefficient development. In addition it is a major issue for the populace whose daily lives are regularly disrupted because of this never ending cycle.

Unemployment

As is the case for most developing economies, India faces a severe unemployment problem. With the growing population, this is an ever growing problem as the job market is not able to keep up with the supply of manpower. This is also partly caused by the flawed education system in India, where skills like entrepreneurship are not given proper attention. Although in the past few years, India has seen a boost in entrepreneurship as a result of various programs and initiatives undertaken by the government, there is still the need to instil the qualities of entrepreneurship into students at a young age as well as teach skills instead of preaching bookish knowledge. If the government is able to solve the problem of unemployment, it will not only reduce the imbalance between supply and demand of manpower, but will also help to ease the issue of poverty.

Conclusion

This list of issues is by no means exhaustive. India faces many more issues, some which are easier to resolve while others that have embedded themselves into the society and economy. These issues act like a burden on our economy. India will have to go through a long and arduous reformation process for her economy to reach new heights and make the nation a true global leader.