General Studies Paper-3

Context: There’s an optimistic belief that India’s economic growth is inevitable .

• But previous countries with similar growth trajectories have often failed to transition to developed status.

India’s Status

• India’s journey towards becoming a developed nation by 2047 hinges significantly on improving its infrastructure, a cornerstone for fostering liveable, climate-resilient, and inclusive cities that drive economic growth.
  • From 1991 to 2011, India’s poverty rate dropped from about 50% to 20%, lifting 35 crore people out of poverty.
  • While income inequality persists, overall living standards have improved, especially for those at the bottom of the economic pyramid.
• Present Scenario :
• India’s real GDP is projected to grow between 6.5–7 per cent in 2024-25. The Indian economy recovered swiftly from the pandemic, with its real GDP in FY24 being 20 per cent higher than the pre-COVID, FY20 levels.
• The World Bank in June 2024 predicted that India is set to remain the fastest-growing major economy globally, though its growth rate is expected to slow.
  • It maintained the GDP growth forecast for India at 6.6 per cent for FY25.

Challenges

• Agricultural Sector: 46% of India’s labor force is in agriculture, which is low-productivity and contributes only 18% to GDP.
• Female Labor Force Participation: At 37%, this is low compared to other countries like China, Vietnam, and Japan.
• Middle-Income Trap: Many countries fail to progress from middle-income to high-income status.
• There is difficulty in leveraging surplus labour for low-end manufacturing, limiting growth opportunities.
• Indian States face cost disabilities for power, logistics and financing, coupled with low labour productivity when compared to countries such as Bangladesh, China and Vietnam, and a compliance burden that deters new players from entering and the existing ones from expanding
• India lags behind in HDI rank mainly because of its low life expectancy and per capita income, which can be improved with government spending in the education and health sectors.

Suggestions

• India’s focus should be on Manufacturing and To grow, India should emulate successful models like South Korea and Vietnam by focusing on low-skilled, export-oriented manufacturing.
  • Prioritize low-skilled manufacturing sectors like electronics and apparel to create large-scale employment.
• There is a need to avoid protectionism because large tariffs could harm industries dependent on imported components, raising prices and reducing competitiveness.
• The government should develop industrial clusters with modern infrastructure, education, healthcare, and other amenities.
• There is a need to maintain a market-led economy with minimal government interference, improve ease of doing business, and foster private enterprise.
• Track inter-State migration, urbanization, female labor force participation, and the decline of agriculture’s employment share to assess progress.
• With ambitious and forward-thinking strategies, India can achieve its economic goals and fulfil its potential.