Factors Hampering Indian Economic Growth

Factors Hampering Indian Economic Growth

Question - The path to economic revival is hard for India. Discuss the factors hampering Indian economic growth.

• The Basel III norms for banks effective from 2018 require INR 2,40,000 crore for capitalisation and retaining 51% equity of PSBs will require INR 121, 000 crore in this financial year

• 2015-2016 Budget has provided for only INR 11,200 crore which is not even 1/10th of this

• Rising NPAs of banks indicate banking crash akin to the 1997-1998 East Asian crash

• Rainfall deficit affecting nearly 67% of single crop farmers will also lead to inflationary pressures and substantial shortfall in production

• Rupee is on the edge of a fall as it was in 2012-2013

• Large scale sell off or dumping of shares of Indian companies bought by foreign investors last year have occurred

• FDI companies have also pulled out of Indian markets

• 10 top corporate entities in India are at the phase where annual profits do not cover annual debt repayments

• India is also home to a backward agricultural sector employing 62% of the workers and farmers are unable to repay loans or access irrigation facilities

• Indian educated youth is skill deficient and India is home to 300 million illiterates and 250 people in dire straits of poverty

• Indian workers are risk averse and unemployable

• India also has a malfunctioning education system

• Indian infrastructure is also in pathetic state on account of power crisis and lack of potable drinking water for everyone even in the most advanced cities

• Rail and road networks and inland ports are woefully inadequate to meet demands

• Internationally, Indian agriculture has the lowest yield in land; though India has 12 months of agricultural friendly weather, it can only grow one crop per year in 75% of the arable land as against 3

• Quality of governance and accountability are below par; India is riddled with corruption

Facts and Stats

• India has shown impressive growth in automobile sector, pharma, biotechnology and IT

• It is the third largest nation in terms of GDP at PPP rates

• It also has a national unemployment rate of over 15% of the adult labour force

• Nearly 50% of Indian children do not make it to school after the fifth standard

• Indian infrastructure needs investment of USD 150 billion to make it work

• Indian education system needs 6% of GDP instead of 2.8%

• India has a demographic dividend and young population with average age of 28 years compared to 35 years for China and EU’s 46 years as against 38 years in the US