Ensuring a sustainable growth remains big challenge for India

China, the world’s most populous country and the second largest economy in terms of nominal GDP, has a staggering figure of $14,096 as its per-capita income as opposed to India’s $2,466, as per the data of the International Monetary Fund

A few weeks ago, media portals were abuzz with a magnificent achievement for India, as the Indian economy grew to become the fifth largest economy in the world. This is no small feat, as even though the accomplishment is based on the size of the nominal GDP, the economy has battled the battering by the Covid-19 pandemic alongside pre-existing difficulties. This is a moment of joy but as we articulate our pride and awe, this is also a suitable moment to self-assess. The path to India’s growth has been rife with challenges and problems still lie in the face of growth and resilience. This merits a rigorous unpacking of the situation, as we take a fresh look at the economy while looking forward to further milestones.

First of all, as a considerable number of people have pointed out, the massive volume of the economy is in nominal cash terms. While the growth and the size of the economy is impressive, as India was outside the top ten in the world a decade ago, we still struggle to achieve imposing numbers in terms of per capita income. A gargantuan population is obviously a factor to account for, but it cannot be summarily considered the reason why the per-capita GDP is not well-placed. China, the world’s most populous country and the second largest economy in terms of nominal GDP, has a staggering figure of $14,096 as its per-capita income as opposed to India’s $2,466, as per the data of the International Monetary Fund.

The other challenge is making the growth sustainable and on a related note, fighting poverty and unemployment. A media report, alongside enumerating humongous losses suffered by the Indian economy during the Covid-19 years, quotes a former Reserve Bank of India governor to this effect,

“Former RBI governor D. Subbarao says India’s big challenges are in sustaining the growth rate and in lifting millions of people out of poverty. “The medium-term challenges are in improving education and health outcomes,” he says, adding that around the world, countries that have moved from low income to middle income over the past 50 years - in East Asia, China, Latin America - have all done so by investing in education and health. Subbarao also cautions that unemployment is the biggest challenge India faces today: “Twelve million people are joining the labour force every year. We are not even able to generate half as many jobs... the problem is reaching explosive proportions.”

The message is loud and clear- India’s achievements are praiseworthy and while the nominal GDP might be on its way to become bigger and bigger, as several predictions estimate, we need changes on the real front as well, in terms of per-capita income, sustainable growth, employment and economic stability for the people. As we celebrate India’s triumphs, it is prudent to think of what needs to be done in the future.

Output from agriculture and industry needs to be increased, alongside a favourable foreign trade volume. Infrastructural advancement and the availability of better technology can help with the first concern. Considering the second concern, since exports volumes have been falling, on account of first world markets dealing with recessionary conditions, we need to incentivise exports to ensure that the GDP growth remains on track. The labour force participation rate has to be aided through creation of full-time jobs, instead of people being compelled to look for work in gig economies all the time. Funding for startups has to be ensured from several sources including Foreign Direct Investment (FDI) to keep the Indian startup ecosystem thriving. Speaking of sustainable growth, as the chief economist of IMF, Pierre-Olivier Gourinchas remarked, structural reforms to help human capital, health, education, digital literacy and access can help the Indian economy sustain and increase its growth continuously.

India is certainly standing at a crucial juncture in its economic history, glimmering with a lot of promise. As we grow and achieve summits of excellence, we must not become complacent and keep looking for ways to do better. India is a beacon of hope for the world and on the economic front, we must soar higher and higher through judicious self-evaluations and applications of worthy plans. There is so much that the Indian economy has overcome and so much that it has accomplished and while a lot of goals await realisation, we shall definitely scale those peaks with the right mix of pride, vigilant self-appraisal and resilient effort.

(The author is Founder, Upsurge Global; Venture Partner, Silverneedle Ventures, and Adjunct Professor of EThames College)