Top Five Challenges of the Indian Economy

India is a developing country that belongs to a middle-income market economy.

In this article, you will know the top five challenges of the Indian Economy.

In July 2021, RBI estimated GDP growth as 21.4%.

Lockdown also played a controversial part in this weak demand in the last two years.

Ballooning unemployment is the second major cause of it. In the surge of covid-19, the unemployment rate increased exponentially due to lockdown as many workshops and companies needed to stop work.

Weak demands

Weak demand is the major challenge to the Indian Economy.

Weak demand refers to such demands that lower the Economy in several aspects. In the pandemic, weak demand becomes a significant problem for GDP and growth rate.

The actual challenge for India is to get back to the same path as pre-pandemic growth. The output rate should be increased to achieve great outputs. 

The waves flash economic indications, causing the rupee to fall in value.

For 56 per cent of respondents, cost management is the next key issue, and restricted financial liquidity is a risk for 43 per cent.

Covid waves devastate the Indian market and private sectors that have businesses.

The contraction of approx 24-25% occurs in business performance. According to statistics, companies observe a less than 50% utilisation rate. It was very small in terms of its installed capacity.

Ballooning Unemployment

Ballooning unemployment means the unemployment rate due for several reasons—job losses, worse conditions in the private sector, fewer government-sector seats, etc.

More than millions of job losses get lost during the pandemic crisis. It is a caution which elucidates ballooning unemployment.

In April and May 2020, 17.8 and 0.2 million job opportunities were lost due to the consequences of the covid surge.

Ballooning unemployment is the prime factor related to challenges to the economy and growth rates.

The adverse effects of it can be seen post-pandemic. 

The flexible jobs in India are falling in a low ratio. It accounts that only 21% of the population of employees work in a flexible environment. Only these employees can work under salaried employment.

Lack of fiscal stimulus

Fiscal stimulus refers to government policies that cut taxes or restrictions while increasing government spending to encourage economic activity.

Lack of fiscal stimulus can lead to Inflation which ultimately becomes a challenge to the Indian Economy.

Inflation refers to a rise in the general price level of all commodities over time. 

Inflation in economics is analysed by the community’s aggregate income and expenditure patterns regarding the availability of goods and services.

In the current financial year, India’s Economy is contracting sharply.

As of 2020, it falls 24% in July. 

The worst performance in the Indian Economy in the recent two years needs to be taken as a challenge, and improvement should occur.

Indian Economy and their subsidiary challenges

The income per capita is low.

Developing economies typically do have low per-capita income. In 2014, India’s per capita income was $1,560. In the same year, the United States’ per-capita Gross National Wealth (GNI) was 35 times that of India, and China’s was 5 times that of India.

Apart from having a low per capita income, India also has an issue with unequal income distribution. As a result, poverty has become a crucial issue and a major impediment to the country’s economic development. As a result, India’s low per-capita wealth is one of the country’s most pressing economic concerns.

The Indian economy is also lacking infrastructure. The lack of infrastructure has an impact on transportation, electrical generation etc. As a result, the potential of various parts of the country is underutilised. 

Population pressure is high.

Another element that contributes to India’s economic problems is its population. India is now the world’s second-most populous country, trailing only China.

Our birth rates are high, but our death rates are decreasing. The administration must meet fundamental needs such as food, clothes, shelter, medical, education, etc. As a result, the country’s economic burden has increased.

Human Capital of Poor Quality

Capital creation, in its broadest meaning, refers to the utilisation of any resources that increases production capability.

As a result, population knowledge and training are a sort of capital. As a result, human capital includes expenditures on education, skill training, research, and health enhancement.

To keep things in context, the United Nations Development Program (UNDP) uses the Human Development Index to rank countries (HDI). It is calculated using life expectancy, educational attainment, and per capita income. In 2014, India was placed 130th out of the overall ranking in this rating.

Conclusion

Here, in this article, you have learned about the challenges faced by the Indian government and Economy. It has many factors involved, such as weak demand and loss of jobs due to the closure of workplaces.

Ballooning unemployment has adverse effects on emerging small workplaces and businesses.

The facts you read and statistics in the article must give you an idea of how the challenges are implemented in the Indian Economy, whether it puts and declines or inclines in growth rates.

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