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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.
