Prof. M K Bhat
India surpassing the economic might of its earlier rulers has sentimental appeal for every Indian on the one hand but the various economic challenges on the other side makes it imperative to introspect the things before arriving at any conclusion. It is no doubt a proud moment for every Indian to see the country at a dignified stage among the various countries of the world. This economic progress from nowhere to this stage is really appreciable.Every Indian rejoiced the news of India becoming 5th largest economy of the world. The flavour of this news sweetened further because of its coincidence with Azadi Ka Amrit Mahotsav- currently being celebrated in the country.It has also charmed people as it has come after the pale of gloom spread by Covid-19 for two years across the globe. The ‘V’ shaped economic recovery in post covid -19 is a good sign of mature economic decision making.Indian economy grew @ 13.5% in April-June quarter of 2022 and thereby maintained its status as the fastest growing economy of the world.The acceptance of this rosy picture makes one to believe that all is well but an introspection makes us to accept that things are not as rosy as they seem to be.
As per IMF projections India is now behind USA, China,Japan and Germany only, its economy today stands as $3.5 trillion while as UK is$ 3.2 trillion economy.The comparison loses its sheen when we take the population of the two countries into consideration. India’s population is 20 times that of UK so the per capita GDP is quite low in India. In India 1.4 billion people live while as 0.068 billion people live in UK.Hence India’s per capita GDP at $ 2500 has miles to go till it reaches per capita GDP of UK at $ 47000.As per the calculations of Bloomberg based on IMF data India in nominal cash terms stood at $854.7 billion while as UK stood at $816 Billion from March quarter.A logical comparison could have been between India and China with almost equal population and both got their independence at almost the same time. China today is an economy of around US $17.7 trillion holding second number in the world next only to USA.
It may however be pointed out here that, GDP gives only a gross view of an economy while as per capita income gives a better understanding of the economic conditions of a country. A few rich can push GDP figures to the highest level without any change in the life of the masses.It is not only income but the distribution of income that makes difference in the life of people. It is worthwhile to point out here that India’s top 10 % hold 57% of the country’s national income including 22% held by top 1% while as bottom 50% held just 13% of the national income in 2021 as per the world inequality report 2022. In Asia pacific region only Papua New Guinea and China are having more inequal distribution of income than India.The former is a small country with its majority living below poverty line.In case of China, it may be held that urban China is much ahead of rural china.The conditions of rural China are very low.
The distribution of income in our country is such that two thirds of Indians live in poverty.68.8 % of people live on less than $2 a day and over 30% on less than $1.25 per day.This ill distribution of income has led to multi-dimensional inequalities in the country. Mention can be made of high infant mortality rate. In India 1.4 million children die each year before their 5th birthday, 200 million do not have sufficient access to food including 61 million children,7.8 million infants were found to have weight below 2.5 kgs.The current infant mortality rate for India in 2022 is 27.695 deaths per 1000 live births.one third of the world poor live in India.
The other things growing as a big challenge for India are recession in world economy accompanied by inflation and interest rate at the home turf.The three main economies USA,China and European economies are slowing down.This will bear a catastrophic impact on world economies. World may soon be teetering on the edge of global recession,only two years after the last one.The baseline forecast for global growth is for it to slow down from 6.1% last year to 3.2%in 2022.The high inflation and tighter monetary policy has pushed USA growth rate to 3.3 % this year -the slowest growth rate in four decades excluding pandemic period.The EU growth rate is likely to be 2.6 %.China is facing a big problem in its infrastructure and energy sector.This is likely to slow down the Chinese growth rate. The devastation in Chinese economy has started,many companies have either closed or shifted their base. However, it is worth mentioning here that many companies may shift their base to India if the economic situation of China deteriorates further.In all it can be held that the international economic slowdown will have a drastic impact on India’s foreign earnings while as our imports can not come down below a particular level primarily because petrol imports comprises a big chunk of our import bill.
On the domestic front inflation in consumer goods is above 6% which is quite high. It has to be brought down in the earlier range of 2 to 4 %and it will bear an adverse impact on the domestic demand for goods. It requires both monetary and fiscal prudence,only monetary policy measures cannot help.The consumer goods price up to a great extent is volatile due to the changes in the oil prices in the international market.The things in the domestic market get further influenced by floods, droughts and low condition of roads etc.There is a need to make balance between interest rate and economic growth as the demand for credit compared to bank deposits is getting higher thereby building pressure on interest rates.
In order to put the economy on right track there is a need of short term and long-term measures to be taken into consideration: Firstly, high population is a big curse, it requires more schools, more infrastructure,more foodetcandthereby leaves little for investment and social development. A national Population policy is required. Demographic dividend is not getting evident because of the additional hands without work.There is a need of population policy in the country. Although we adopted family planning much early than many countries but it yielded little due to illiteracy, religious hindrances etc. It is time to control population drastically and it can be done by curtailing basic benefits to those who produce more children.
Secondly, freebies need to be curtailed to restore the health of the economy. The concessions should go to those who deserve it, mention can me made of people below poverty line.It should not flow like “Rewari” to everyone, at the cost of honest tax payer.These schemes help only the politicians to win their elections and bear a wrong impact on the economic growth of the country.
Thirdly the cottage,micro and small- scale industries need to be encouraged as they are mostly labor intensive and can help to employ more people. There is a drastic need of encouraging agriculture-based industries and integrated farming in the country.The rural development will reduce the income inequality and can be a real step towards New India.
(The author is Professor (M.A.I.T) Guru Gobind Singh Indraprastha University, Delhi)
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