This article does not intend to provide in-depth analysis and reporting on the Indian economy. Rather, it will provide a general synopsis of the current discussion that revolves around the expected growth of the Indian economy over the next few years and lists several key issues it will face as it attempts to meet those expectations.
Current Status of the Indian Economy
Currently, the economy of India is the eleventh largest in the world by nominal GDP and the fourth largest by purchasing power parity. With over 1.2 billion people living there, the Indian economy is expected to reach at least 60% of the size of the US economy by 2035, which would make it the third most influential economy on the planet, behind the US and China.
Brief History of the Indian Economy
In 1700 AD, just prior to colonization by the British, the Indian economic share of the global pot was about 22%. India enjoyed a strong place among the leading nations of the world at the time. Under British colonial rule, this fell to just 4% in 1952. The British consumed too much and prices for the average citizen went too high, thus creating a serious economic downturn that lasted for over 200 years.
After India achieved independence in 1947, it began the long process of rebuilding its economic position in the world. Today, India boasts the fourth largest economy on the planet and is expected to move into third place by 2035. At present, the largest sector of the economy is the servicing industry, which accounts for 58% of the country's GDP. In the past, the major source of income for the nation was from agriculture, but today it accounts for only 28% of the country’s GDP.
The Indian economy is definitely an undeniable force and trends suggest that it will continue to grow, however, India has several significant challenges that it must address if the current predictions are to hold true.
Illiteracy – A good number of Indians are illiterate and this affects the nation's economic growth. Rural India is highly dependent on agriculture but the lack of technology results in poor productivity. A good percentage of Indian farmers haven’t adopted the modern technology that is available, in part due to cost, but mostly due to the lack of understanding amongst this section of people as to the benefits of modernization. Beliefs associated with illiteracy plays a major role in this.
Over-population – Overpopulation is the nightmare of India. The country is witnessing a population expansion and there are no chances for this to come down in the near future. Even the though the Indian government has tried to implement family planning policies similar to what China has done for several decades, the success rate of such policies are very low because most people do not feel the need for it. The overpopulation in India can also be directly linked to the illiteracy rate of the population. It is very difficult for a central government to communicate with its citizens that cannot read or write.
Under-Governance - Compared to its strictly ruled economic rival China, India still has many states where governance is very poor. This affects the infrastructure and education systems in such states and people from those states remain underprivileged. Some of these states include Bihar, Uttarakhand, Jharkhand, Orissa, Madhya Pradesh and Utter Pradesh. Interestingly, half of the Indian population lives in these states and their growth has a huge influence on the Indian economy.
Corruption – The lack of proper governance in many states result in extreme corruption. Corruption can be seen everywhere in the bureaucracy from a village officer to top-level bureaucrats who work in the Central Cabinet Ministry. As in most developing economies, corruption is the antithesis of sustainable growth and economic parity amongst the masses. It sours foreign investment and curtails the growth of wealth within the middle class. For India’s economy to experience the type of exponential growth that is happening in China, the foreign investment in India will have to expand as well as the internal growth of the middle class. For these things to happen, corruption will have to be curtailed.
Although it faces several difficult issues, it is undeniable that the Indian economy has a global influence. The nation has strong global buying power and continues to see growth and investment from richer nations and their corporations. Compared to China, which has already addressed many of the same concerns, India is still faced with the struggle to overcome the things mentioned in this article as well as several other critical factors that will impact economic growth. Current predictions, if accurate, give the Indian economy every expectation of succeeding in becoming one of the three most influential economies in the world within the next 20-25 years.
Sources:
http://www.sharetipsinfo.com/indian-economy.html, accessed 5 December, 2010.
http://en.wikipedia.org/wiki/Economy_of_India, accessed 5 December, 2010.
http://www.imf.org/external/pubs/ft/weo/2010/01/weodata/weorept.aspx?sy=2007&ey=2010&scsm=1&ssd=1&sort=country&ds=.&br=1&c=534&s=NGDPD%2CNGDPDPC%2CPPPGDP%2CPPPPC%2CLP&grp=0&a=&pr.x=81&pr.y=8, accessed 5 December, 2010.
