Problems Facing the Indian Economy

Problems Facing the Indian Economy

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Since 1991, the economy of India has pursued greater openness in trade, free market liberalization, and infrastructure investment. This contributed to the rapid economic growth and development of the Indian economy. However, the economy continues to face a number of issues, including corruption, inadequate infrastructure, rural poverty, and low tax collection rates.

1. Unemployment - Despite the rapid expansion of the economy, unemployment remains a problem in both urban and rural areas. Unskilled workers have been left behind by economic expansion's rapid pace, making it difficult for them to find work in expanding industries. However, over 30% of Indians between the ages of 15 and 29 are NEETs—not in employment, education, or training—according to an OECD report. It leads to extreme poverty because the government provides little, if any, welfare assistance to the unemployed.

2. Poor educational standards - Even though India has a high percentage of English-speaking people, which is important for the call center industry, there are still many people who are illiterate. Women and rural areas suffer the most. Over half of Indian women lack literacy skills. Economic growth and a more skilled workforce are hampered as a result.

3. Lack of Infrastructure - A lot of Indians doesn’t have access to running water or other basic amenities. Due to inefficiency and bureaucracy, Indian public services are failing. Over forty percent of Indian fruit spoils before it can be sold; this is one illustration of the inefficiency and constraints on supply that the Indian economy faces.

4. Decline in the balance of payments - India's rapid economic expansion has resulted in a pervasive current account deficit, despite the country's substantial foreign currency reserves. The current account peaked at 6% of GDP toward the end of 2012.The current account has improved in the intervening time. However, imports have increased more rapidly than exports in the Indian economy. India must therefore attract capital to finance the deficit. The fear of a further devaluation of the rupee is always present while the deficit persists. The economy must be rebalanced, and exports must become more competitive.

5. High levels of private debt - The amount of money loaned in India has increased by 30% in the past year thanks to a property boom. However, there are concerns regarding these loans' risk. It could be a problem if they are reliant on rising property prices. Furthermore, the RBI may be forced to raise interest rates if inflation continues to rise. Assuming loan fees rise considerably, it will leave those obligated confronting rising interest installments and possibly lessening customer spending from here on.

6. Instead of decreasing, inequality has increased - It is hoped that economic expansion will assist in lifting the poor of India above the poverty line. However, economic expansion has so far been highly uneven, disproportionately affecting the wealthy and skilled. Many of India's rural poor have not yet seen any measurable benefits from the country's economic expansion. There are over 78 million homes without electricity.33% of the population, or 268 million people, survive on less than $1 per day. In addition, as television has spread throughout Indian villages, the poor have become more aware of the wealth gap.

7. Large Budget Deficit - It is hoped that economic expansion will assist in lifting the poor of India above the poverty line. However, economic expansion has so far been highly uneven, disproportionately affecting the wealthy and skilled. Many of India's rural poor have not yet seen any measurable benefits from the country's economic expansion. There are over 78 million homes without electricity.33% of the population, or 268 million people, survive on less than $1 per day. In addition, as television has spread throughout Indian villages, the poor have become more aware of the wealth gap.

8. Inefficient agriculture - accounts for 17.4% of economic output but employs over 51% of the workforce. This is the economy's most inefficient sector, and reform has been slow.

9. Unfortunate assessment assortment rates - The Economist claims that India has one of the lowest tax-to-GDP ratios in the world. As of 2022, India's tax revenue is just 12% of GDP. Compared to the EU average of 45 percent. Corruption, tax evasion, and complicated tax rates are all to blame for this low tax collection rate. According to the World Bank, doing business in India is difficult. India gets 130 out of 190.Companies face a number of major issues, including: a. the ease with which contracts can be enforced; b. managing construction contracts; c. paying taxes; and d. trading across borders. Regional inequality India's economic expansion has benefited some regions more than others. Higher-paying jobs have been attracted to technological hubs like Delhi and Mumbai. The majority of skilled and mobile workers have flocked in as a result; this has made blockage in these super-urban communities yet neglected to address the neediness of country regions, particularly in the upper east