Prospects and problem of Indian economy

Prospects and problem of Indian economy

India's GDP growth rates slowed down to 5% in FY20. The reason for the slowdown is a combination of cyclic and structural factors along with the collapse of aggregate demand and global uncertainties. The government has announced several measures to improve consumption and investment through stimulus, monetary policy and structural measures such as the reduction in corporate tax. The chief economic advisor mentions the importance of long-term structural reforms for investment-led growth. In addition, the focus should be on physical infrastructure development, raising human capital, and revival of the rural economy to achieve 5$ trillion economy by 2024.

As per Nss employment data the share of manufacturing employment was only 12% in total employment. To increase employment the focus should be on infrastructure investment, structural reforms in land acquisition and a favourable exchange rate for exports to revive the manufacturing sector.

The second structural issue is human capital formation. Health and education are essential for human capital formation. But the progression in health and education are pathetic, very few parts of our country shows good result in these areas. Besides this, Niti ayog report says only 2.3% of Indian workers have formal skill training compare to 70- 80% in other countries. Also a country cannot reap the benefits of demographic dividends with poor human capital. The structural changes are impossible without education and skill development. Women's labour participation is consistently declining, so rising women's human capital is imperative along with improving children nutrition. 

Lastly, rural economy needs to be revived to increase the demand as a whole. In order to revive rural economy, agricultural marketing, rural Infrastructure and water management should be the priority. These reforms will help in developing the value chain in the rural economy.

However, the centre has to work closely with states akin to the GST council for achieving higher growth. The massive mandate of the present government will help in this direction.