India's economic trajectory has propelled it to become the world's fifth-largest economy, a testament to its dynamic growth and resilience. The nation's journey from a predominantly agrarian society to a powerhouse in information technology, manufacturing, and services has been marked by strategic policy reforms and robust entrepreneurial spirit.
According to International Monetary Fund (IMF), India passed the United Kingdom (UK) to become the 5th largest economy in the world in the last quarter of 2021.
One of the key factors contributing to India's economic prominence is its demographic dividend. With a large and youthful population, India has a significant labour force, fostering innovation and productivity across various sectors. The IT boom, particularly in cities like Bangalore and Hyderabad, has positioned India as a global technology hub, with software services, outsourcing, and software development becoming major contributors to the economy.
India’s comparative edge:
●The demographic dividend opportunity window opened for India in 2005–2006 and will close in 2055–2056. Almost 65 percent of Indians are of working age, which means the future labour force for more than half of Asia could come from India.
●India has emerged as a global agricultural powerhouse. We are the world’s largest producer of milk, pulse, and spices, and 2nd largest producer of rice, wheat, cotton, sugarcane, farmed fish, sheep & goat meat, fruit, vegetables and tea.
●India is in a good position to gain from the outsourcing of IT and business services. Low-cost of workers advantage, large pool of English-speaking skilled manpower and latest technology solutions makes India the most attractive outsourcing hub. Also Indian IT giants such as Infosys, WIPRO and TCS have made their mark on the global platform.
●Due to its vast cultural, rich history, remarkable diversity and natural resources, India has enormous potential to grow its tourism industry and generate employment.
India's embrace of economic liberalization in the early 1990s played a pivotal role in shaping its current economic landscape. Reforms aimed at reducing red tape, encouraging foreign direct investment, and fostering competition spurred economic growth.
The manufacturing sector has also undergone a transformation, with initiatives like 'Make in India' promoting domestic production and self-reliance. Efforts to enhance infrastructure, streamline regulatory processes, and attract foreign investment have positioned India as a manufacturing hub for diverse industries, ranging from automobiles to electronics.
India's service sector, encompassing IT, telecommunications, finance, and healthcare, has witnessed remarkable growth. The outsourcing industry, in particular, has flourished, providing cost-effective solutions to global businesses.
While India's economic ascent is evident, challenges persist. Income inequality, regional disparities, and bureaucratic hurdles remain hurdles that need addressing. Moreover, the agrarian sector, which employs a significant portion of the population, faces challenges such as fragmented land holdings and inadequate infrastructure.
Challenges:
●According to CMIE (Centre for Monitoring Indian Economy), the unemployment rate in India is around 6.4% as of September 2022. This is because job growth has not kept pace with GDP growth. Only 40% of the labour force that is capable of working is actually employed or looking for work, in which women have a lower participation rate.
●Geopolitical issues like the Russia-Ukraine war, border tensions with China, and the challenge of terrorism from Pakistan are creating supply chain constraints.
●India’s trade deficit is growing. It reached a record 31 billion dollars in July 2022.
●The Indian rupee is under pressure due to capital outflows and a growing current account deficit.
●The global economic landscape also influences India's position. Trade relations, geopolitical developments, and international economic trends can impact the nation's growth trajectory. India's ability to navigate these external factors while maintaining domestic stability is crucial for sustained economic progress.
India's economic resilience was evident during the COVID-19 pandemic. While the global economy contracted, India showcased adaptability and agility. The crisis prompted structural reforms, digital acceleration, and a renewed focus on healthcare infrastructure, highlighting the nation's capacity to navigate challenges and emerge stronger.
In conclusion, It is a proud moment for all Indians that our country has grown to become the 5th largest economy in the world. However, it’s equally crucial to keep a check on whether the poor are benefiting from a growing economy. India's journey to becoming the fifth-largest economy is a narrative of transformation, innovation, and adaptability. Strategic reforms, demographic advantages, and advancements in technology have propelled the nation into a prominent position on the global economic stage. Addressing remaining challenges and fostering inclusive growth will be imperative for India to sustain and enhance its economic standing in the years to come.
