Free Essay: Challenges Facing Indian Economy

India has enjoyed a period of economic growth in recent years. Since early 90s, it has embraced free market liberalization, opened up opportunities for trade and improved infrastructural investments. While this is the case, India’s economy faces a myriad of challenges. In this paper, we highlight some of these bottlenecks.

The first challenge is inflation. This is mainly spurred by increasing wages, and high cost of food and property in the country. India’s inflation oscillates between 8 and 10% and this has been the case even in times of economic slowdown. For instance, in 2013, the country’s inflation hit a high of 11% though its growth dropped to 4.8%. This implies that other factors lead to inflation in India apart from demand. As a result, the Central Bank of India has prioritized the inflation reduction, even though it remains a complex issue to tame.

Another problem, which affects India’s economy, is low education for its people. The country has high levels of illiteracy despite the fact it has benefited from high number of English speakers in the country. The situation is pathetic in rural areas, with women ahead of men in numbers. Research shows that over 50% of Indian women are illiterate. Because of this bulging number of illiterates in the country, India has a limited skilled work force. The trend further weighs negatively on economic development as education is a key pillar in any developed economy.

The third challenge is poor infrastructure. Majority of Indians find difficulties in accessing basis amenities like piped water. For years, India’s public service has been crippled with high levels of inefficiency and bureaucracy, which affect the population negatively. Consequently, the economy suffers as more than 40% of fruits in India spoil before reaching the market. A major contributor to this is supply constraints and inefficiency that threat the country’s economy.

Another challenge affecting the economy of India is the ever-increasing gap between the rich and the poor. This inequality has skyrocketed over the years, when the world expected it to go down. However, some people are highly optimistic that economic growth in the country will pull the poor to rise above the poverty line. As per now, the system highly favors the wealthy and skilled Indians, leaving majority of the people in abject poverty. Even with the much-hyped economic growth, no rural Indian has felt the growth, as their lives are yet to change for the better.

Access to electricity is also a problem as over 78 million homes countrywide do not have electricity with about 33% of the population living below a dollar a day. Because of high flow of information through electronic media, there is growing awareness about this disproportionate economic state between the wealthy and poor Indians. Like other developing countries, India has a budget deficit, which is largest among its counterparts. This accounts for about 8% of the country’s GDP with an exclusion of subsidies. The country also has archaic and rigid labor laws, which affect the performance of most companies and organization. For instance, any firm with more than 100 workers cannot fire an employee without the government’s permission. This discourages companies from expanding their capacities to accommodate more than 100 workers.

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Online Resources:

http://www.economicshelp.org/india/problems-indian-economy/

http://blogs.lse.ac.uk/indiaatlse/2013/12/18/top-10-economic-and-development-challenges-for-india-in-2014/