A roadmap to eliminate poverty in India

Source: The post is based on the article “A roadmap to eliminate poverty in India” published in “The Indian Express” on 19th July 2023.

Syllabus: GS 3- Indian Economy and issues relating to planning, mobilisation of resources, growth development and employment.

News: This article outlines India’s path to achieving a 7% growth rate. It emphasises domestic investments, technological adaptation, managing global challenges, environmental balance, and the potential of a basic income system.

What is the current and future growth status of India?

Current growth status of India:

Per capita income: India’s per capita income was $2,379 in 2022-23.

Investment rate: The Gross Fixed Capital Formation rate in 2022-23 stood at 29.2% of GDP.

Global position: India is the world’s fifth-largest economy, yet 149th out of 194 in per capita terms.

Trade Concerns: Developed nations are retreating from the free trade model, potentially impacting India’s global trade prospects.

Future growth prospects for India:

Targeted growth: India aims for a 6-7% continuous annual growth.

Technological adaptation: Emphasis on integrating Artificial Intelligence in industries, though job creation remains a concern.

Environmental responsibility: Aiming for a more sustainable growth rate considering environmental constraints.

Basic income: Plans to introduce a basic income for financial security, potentially reducing other subsidies.

What are the threats to India’s future growth?

Global tensions: The Ukraine-Russia conflict has impacted the overall global peace climate. Prolonged tensions can hinder international collaboration and growth prospects.

Trade barriers: Developed countries, which once championed the free trade model, are now imposing restrictions on imports. Such barriers can harm India’s emerging ability to compete in global markets.

Technological disruptions: While India is poised to integrate Artificial Intelligence, it may boost productivity but not necessarily jobs. Given India’s populous nature, AI’s potential job-reducing ramifications can be a significant threat.

Environmental commitments: Addressing environmental concerns, like pollution reduction, can influence the overall output. Achieving a growth rate beyond 6-7% might be challenging when factoring in sustainable goals.

Developed countries’ stance: Historically industrialized countries have a significant carbon footprint. If these nations push developing countries like India to bear the brunt of pollution reduction, it could strain India’s growth.

Job market elasticity: With modern technology integration, India may face a lower employment elasticity concerning output, implying that even if the economy grows, it might not translate to proportional job growth.

Resource constraints: Achieving the desired Gross Fixed Capital Formation rate of 30-32% may be challenged if domestic and foreign investments don’t match expectations, given the 29.2% rate of 2022-23.

What should be done?

Enhance investment rate: Target a Gross Fixed Capital Formation rate between 30-32% of GDP. With the current rate at 29.2% for 2022-23, focused efforts can bridge the gap.

Prioritize key sectors: Allocate resources to agriculture, manufacturing, and exports. This can build on existing strengths and open avenues for global trade.

Harness technological evolution: Embrace Artificial Intelligence and its applications. While ensuring its integration, prepare the workforce for potential changes in job dynamics.

Review trade strategies: Given the changing stance of developed countries on trade, India should re-evaluate its global trade partnerships and navigate barriers.

Sustainable growth: While aiming for a 6-7% growth, integrate environmental sustainability measures. Balancing growth with environmental responsibility is crucial.

Education & skill development: Reform the education system to equip students with skills relevant to evolving industries, especially in tech domains.

Promote domestic investments: While welcoming foreign investments, especially in emerging tech sectors, prioritize and incentivize internal investments for more sustained growth.

Implement basic income: Explore introducing a basic income structure. Such a system can provide financial security, possibly leading to more consistent consumer spending and reduced reliance on other subsidies.