Source– This post on India’s economic growth and challenges has been created based on the article “India as third-largest economy: It’s quality of jobs that will determine quality of life” published in “Indian Express” on 27th June 2024.
Why in the news?
Recently, the IMF projected that India is on track to surpass Japan to become the fourth-largest economy in the world by the end of 2025.
About India’s Economy Growth
1. Over the next few years, India’s economy is set to grow significantly, possibly becoming the world’s third-largest economy.
2. According to the IMF, India might surpass Japan by the end of 2025 and then Germany by 2027. This would place India alongside the US and China at the top of the global economic rankings, barring any major setbacks.
3. By the end of the current government’s term, India’s GDP is expected to reach $5.8 trillion, up from $3.5 trillion now. This increase of $2.3 trillion is almost the size of Spain and the Netherlands combined.
4. The IMF projects an average annual growth rate of 6.5%, which seems achievable based on past performance. However, this growth rate is slower than the rapid pace seen in the mid-2000s.
5. Recent surveys show an increase in informal enterprises, which employ around 11 crore (110 million) workers, many in small roadside shops.
6. Despite growth, India will remain the poorest among the largest economies, with a per capita income of $4,281 by 2028-29, below the upper middle-income category.
Challenges in India’s growth
1.Key sectors are becoming more capital-intensive, leading to fewer jobs, and decreased migration limits resource flow from urban to rural areas.
2. Sustaining high growth rates and broadening the consumption base is challenging due to many workers in low-productivity jobs.
3. The percentage of informal establishments hiring workers has decreased from just under 16% in 2015-16 to less than 15% in 2022-23.
4. Informal jobs have low productivity and earnings, adding about Rs 1.4 lakh in value compared to Rs 15.04 lakh in formal enterprises.
5. Wage growth for these workers has barely kept up with inflation over the past decade.
6. Including 23 crore (230 million) people in agriculture, almost two-thirds of the labor force are in low-productivity jobs.
7. Those lacking skills for formal sectors often find precarious jobs in the gig economy, such as with Uber and food delivery services.
8. Job quality and availability remain longstanding issues, exacerbated by a growing youth population, more women entering the workforce due to financial stress, and a shrinking informal sector.
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