On September 2, 2022, the International Monetary Fund (IMF) announced that India had surged past the United Kingdom to become the fifth largest economy in the world based on Gross Domestic Product (GDP). However, a question lurks in the dark: if this is really the economy that the people of India wanted? Is India actually capable enough to become an economic superpower? Has India actually outperformed other countries in economic prosperity? Having said that, let’s take a closer look at the fundamentals of the Indian economy to see how it has fared post the pandemic.
According to the World Inequality Report 2022, the top 1% of the Indian population holds almost 22% of the national income, whereas the bottom 50% hold less than 13%. Although income inequality is a feature noticeable in many developed economies, what makes it significant in our context is the fact that it existed in India even before the 19th century. It marginally reduced after the Independence but substantially increased after the 1990 economic reforms. The situation has only worsened after the Covid-19 pandemic.
Infrastructure is one of the key factors in assessing the strength of an economy. When it comes to India, its infrastructure has always been on the back foot. Last year, the Government announced the Gati Shakti Initiative to establish a world class infrastructure by planning to extend the National Highways by 25,000 kilometres along with 400 new Vande Bharat trains and 100 cargo terminals. Even with these major announcements, implementation remains an unsolved variable in the equation, as over 9300 infrastructure projects still remain incomplete.
The huge share of agriculture in the economy also remains a matter of concern as none of the biggest 10 economies of the world have such a huge dependence on agriculture. While agriculture has the highest share in employment, its contribution to GDP is the lowest, which is a rare phenomenon in a developed economy. India must move its workforce to the industrial and service sectors in order to provide secure and regular employment to its working population, which is the number of people in the age group of 15-64 years.
Tax revenues are the bread and butter of any country’s budget. Interestingly, even after the pandemic, India’s tax collection hasn’t taken a big hit as much as in other countries. However, tax collection rates were low even before the pandemic with only a fraction of the people paying taxes. This also increases the budget deficit of the country. For the uninitiated, budget deficit is the excess of government expenditure over its revenue.
Education and health are other key factors used for assessing the quality of the workforce of a country. The two-year long haul of the pandemic had a devastating impact on the education sector. Experts predict that almost 250 million children were affected because of the pandemic and the drop-out rates skyrocketed, especially for primary learners. The digital divide increased as people from underprivileged sections had little to no access to proper education.
Now, as we transition back into offline schooling, teachers are burdened with covering for the learning loss during the pandemic. This has also exposed the vulnerability of the Indian education system to such crises, and the readiness of schools and other educational institutions to integrate digital-based learning into their system. The sustainability of private schools also comes into question as they continue to charge exorbitant amounts of tuition fees. Considering a wide array of other challenges, the New Education Policy (NEP) 2020 was also announced to transform our education system to adapt to the dynamic changes in the job landscape and overcome technological disruptions.
The pandemic also revealed the ugly side of our health infrastructure and its ability to serve our population. India’s health infrastructure is inadequate to serve its massive population, and the situation worsens in rural areas. The private sector controls over 70% of the hospitals and 60% of the dispensaries, making healthcare expensive and inaccessible for certain sections of society. There is a huge dearth of local dispensaries, Primary Health Centers (PHCs), Community Health Centers (CHCs), sub-centres, hospitals with X-ray facilities, blood testing, and ECGs in rural areas. Even after the first wave, we failed to act upon this due to which the second wave wreaked havoc in the country with the Capital witnessing a horrific crisis.
In conclusion, we see that the private sector has played a significant role in driving the GDP numbers. The startup sector has also been instrumental in driving investors’ confidence and stimulating innovation in the country. While India has done a commendable job in controlling inflation, it has been unable to control the depreciation of the rupee, which has hit an all-time low against the US Dollar. While the numbers are attractive, India still needs to work on infrastructure, education, health and transportation among a host of other problems if it wants to take its rightful position in the world as an economic superpower.