{"id":16860,"date":"2023-07-28T00:00:00","date_gmt":"2023-07-28T00:00:00","guid":{"rendered":"https:\/\/www.nextias.com\/current_affairs\/uncategorized\/28-07-2023\/anatomy-of-indias-growth\/"},"modified":"2025-07-10T18:14:34","modified_gmt":"2025-07-10T12:44:34","slug":"anatomy-of-indias-growth","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/28-07-2023\/anatomy-of-indias-growth","title":{"rendered":"Anatomy of India\u2019s Growth"},"content":{"rendered":"

Anatomy of India\u2019s Growth<\/u><\/span><\/span><\/span><\/h2>\n

Syllabus: GS3\/ Indian Economy & Related Issues<\/strong><\/span><\/span><\/span><\/h3>\n

In Context<\/u><\/strong><\/span><\/span><\/span><\/h3>\n
    \n
  • In 2022, India became the 5th largest economy in the world & will soon become the third-largest economy.<\/span><\/span><\/span><\/li>\n<\/ul>\n

    India\u2019s way towards third-largest economy<\/u><\/strong><\/span><\/span><\/span><\/h3>\n
      \n
    • The <\/span><\/span><\/span>data sourced from the International Monetary Fund (IMF)<\/strong><\/span><\/span><\/span> show that India is indeed forecast to become the third-largest economy by 2027.<\/span><\/span><\/span><\/li>\n
    • Despite India\u2019s economy not growing as fast as it would like to<\/strong><\/span><\/span><\/span> (read 8%-9% per annum), <\/span><\/span><\/span>even a more modest growth rate of 6% per annum<\/strong><\/span><\/span><\/span> will be enough for India to overtake Germany and Japan by 2027.<\/span><\/span><\/span><\/li>\n<\/ul>\n

      Significance of India\u2019s Global position<\/u><\/strong><\/span><\/span><\/span><\/h3>\n
        \n
      • India\u2019s GDP has grown by 83% between 2014 and 2023.\u00a0<\/span><\/span><\/span><\/li>\n
      • This is just a shade lower than the 84% increase achieved by <\/span><\/span><\/span>China <\/strong><\/span><\/span><\/span>during this period. The<\/span><\/span><\/span> US <\/strong><\/span><\/span><\/span>GDP increased by 54%.\u00a0<\/span><\/span><\/span><\/li>\n
      • However, barring these three countries, all the other top 10 countries have seen their GDP stagnate or even contract.<\/span><\/span><\/span>\n
          \n
        • Of the five countries that India overtook in the 9 years since 2014, the <\/span><\/span><\/span>UK\u2019s <\/strong><\/span><\/span><\/span>total GDP has grown by a total of 3%, <\/span><\/span><\/span>France\u2019s <\/strong><\/span><\/span><\/span>by 2%, <\/span><\/span><\/span>Russia\u2019s <\/strong><\/span><\/span><\/span>by 1%.\u00a0<\/span><\/span><\/span><\/li>\n
        • Italy\u2019s <\/strong><\/span><\/span><\/span>GDP has not grown at all while <\/span><\/span><\/span>Brazil\u2019s<\/strong><\/span><\/span><\/span> GDP has contracted by 15%.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n

          Key drivers of India\u2019s growth<\/u><\/strong><\/span><\/span><\/span><\/h3>\n
            \n
          • Digital competitiveness:<\/strong><\/span><\/span><\/span>\n
              \n
            • India has a<\/span><\/span><\/span> strong digital advantage<\/strong><\/span><\/span><\/span> with its <\/span><\/span><\/span>900 million working-age population having affordable internet<\/strong><\/span><\/span><\/span> access at $2.5\/month and 650 million smartphones, all running on the India Digital Stack.\u00a0<\/span><\/span><\/span><\/li>\n
            • This has led to<\/span><\/span><\/span> deeper inclusion and new demand<\/strong><\/span><\/span><\/span> for financial services, consumer goods, healthcare, and education.\u00a0<\/span><\/span><\/span><\/li>\n
            • The <\/span><\/span><\/span>unbanked population has reduced <\/strong><\/span><\/span><\/span>to under 20%, per capita data consumption is among the highest in the world at 17 GB and e-commerce is already at 7%.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n
            • Technology skills:<\/strong><\/span><\/span><\/span>\n
                \n
              • India has an unparalleled base of technology skills.\u00a0<\/span><\/span><\/span><\/li>\n
              • Technology services exports crossed $150 billion<\/strong><\/span><\/span><\/span> in FY22 and continue to be relevant in an ever-digitising world.\u00a0<\/span><\/span><\/span><\/li>\n
              • There are<\/span><\/span><\/span> 1,500 global capability centres in India<\/strong><\/span><\/span><\/span>, set up by many of the <\/span><\/span><\/span>Fortune 500<\/strong><\/span><\/span><\/span>. With 5 million employees, the sector accounts for 40% of the global technology workforce.\u00a0<\/span><\/span><\/span><\/li>\n
              • IT exports essentially pays for India’s oil import bill.<\/strong><\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n
              • Transformative public infrastructure investment:<\/strong><\/span><\/span><\/span>\n
                  \n
                • India has<\/span><\/span><\/span> among the best metro airports in the world <\/strong><\/span><\/span><\/span>and is the <\/span><\/span><\/span>third largest air traffic market <\/strong><\/span><\/span><\/span>having grown at a CAGR of 17% pre-Covid.\u00a0<\/span><\/span><\/span><\/li>\n
                • Investments in airport infrastructure are providing deeper access to remote areas.\u00a0<\/span><\/span><\/span><\/li>\n
                • Similar investments in <\/span><\/span><\/span>ports, railways and highways <\/strong><\/span><\/span><\/span>are creating a <\/span><\/span><\/span>world-class transportation network <\/strong><\/span><\/span><\/span>that will enable the creation of an efficient and integrated ecosystem for <\/span><\/span><\/span>manufacturing, logistics and exports.<\/strong><\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n
                • Development of a dominant manufacturing base:<\/strong><\/span><\/span><\/span>\n
                    \n
                  • The Indian government is working to increase the<\/span><\/span><\/span> manufacturing sector’s share of GDP <\/strong><\/span><\/span><\/span>from the current 15%\u00a0<\/span><\/span><\/span><\/li>\n
                  • This is being done by introducing <\/span><\/span><\/span>multiple programs, such as\u00a0<\/strong><\/span><\/span><\/span>\n
                      \n
                    • The phased manufacturing program<\/strong><\/span><\/span><\/span> and\u00a0<\/span><\/span><\/span><\/li>\n
                    • The <\/span><\/span><\/span>production linked incentive<\/strong><\/span><\/span><\/span> scheme and\u00a0<\/span><\/span><\/span><\/li>\n
                    • By reducing and simplifying<\/span><\/span><\/span> tax regimes<\/strong><\/span><\/span><\/span>.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n
                    • One of the tailwinds is the <\/span><\/span><\/span>diversification of global supply chains<\/strong><\/span><\/span><\/span> away from China, where the median age is 38 and the labour supply continues to get tighter.<\/span><\/span><\/span> India’s demographic dividend <\/strong><\/span><\/span><\/span>can step in to fill the gap.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n
                    • Initiatives to reduce external energy dependence:<\/strong><\/span><\/span><\/span>\n
                        \n
                      • India is working to <\/span><\/span><\/span>achieve energy independence by 2047<\/strong><\/span><\/span><\/span> and reduce the $100 billion spent annually on energy imports by increasing investments in renewable energy and green hydrogen.\u00a0<\/span><\/span><\/span><\/li>\n
                      • The government has set a goal of 500 GW of renewable capacity by 2030, requiring $300 billion in investments.\u00a0<\/span><\/span><\/span><\/li>\n
                      • India is making progress, such as <\/span><\/span><\/span>achieving 83% electrification in railways<\/strong><\/span><\/span><\/span> and <\/span><\/span><\/span>aiming to reach 100% by 2024<\/strong><\/span><\/span><\/span>.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n
                      • India’s continued dominance as a food basket to the world:\u00a0<\/strong><\/span><\/span><\/span>\n
                          \n
                        • It is the largest producer of milk, pulses, and spices, and second largest in fruits, vegetables, tea, farmed fish, cotton, sugarcane, wheat, and rice, supporting 17.8% of the world’s population.\u00a0<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n
                        • Resilient banking system:<\/strong><\/span><\/span><\/span>\n
                            \n
                          • India’s financial institutions have shown resilience with a substantial decrease in NPAs (11% in FY18 to 5% currently) and capital adequacy (17%) to support credit growth.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n
                          • Political stability and innovative public policy:<\/strong><\/span><\/span><\/span>\n
                              \n
                            • India has a<\/span><\/span><\/span> stable political climate<\/strong><\/span><\/span><\/span> which has led to consistency and predictability in policies in the last decade promoting efficiency and agility in doing business.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n

                              Challenges<\/u><\/strong><\/span><\/span><\/span><\/h3>\n
                                \n
                              • Slowed growth momentum:<\/strong><\/span><\/span><\/span>\n
                                  \n
                                • India\u2019s growth momentum has slowed down considerably between 2014 and 2023 when compared with the 2004-2014 period (when GDP grew by a total of 183%).<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n
                                • Greater gaps ahead:<\/strong><\/span><\/span><\/span>\n
                                    \n
                                  • Moving from rank 10 to rank 5 was relatively easier because the GDPs were within $1 trillion of each other.\u00a0<\/span><\/span><\/span><\/li>\n
                                  • The gap between the third rank and the first two is far greater.\u00a0<\/span><\/span><\/span>\n
                                      \n
                                    • In 2027, India\u2019s GDP will be one-fifth of China\u2019s (short by $20 trillion) and one-sixth of the US’s (short by $26 trillion).<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n
                                    • Low per capita GDP:<\/strong><\/span><\/span><\/span>\n
                                        \n
                                      • One should not forget that these are aggregate numbers for the whole country.\u00a0<\/span><\/span><\/span><\/li>\n
                                      • Actual prosperity is better captured by per capita GDP numbers. Here, the gap is way too much.\u00a0<\/span><\/span><\/span><\/li>\n
                                      • At $2,600 per annum, India\u2019s per capita GDP is not only the lowest among the top 10 countries but considerably lower than that of the countries it has overtaken, such as $47,000 in the UK or $10,000 in Brazil or $37,000 in Italy.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n
                                      • Others:\u00a0<\/strong><\/span><\/span><\/span>\n
                                          \n
                                        • Threat of rising inequality, Possibility of egregious consequences in trying to achieve growth etc.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n

                                          Way ahead<\/u><\/strong><\/span><\/span><\/span><\/h3>\n
                                            \n
                                          • India is a strong investment destination due to its diverse economy, growing middle class, and stable political environment.\u00a0<\/span><\/span><\/span><\/li>\n
                                          • Its expanding technology sector and economic liberalisation offer many opportunities for businesses and investors.\u00a0<\/span><\/span><\/span><\/li>\n
                                          • The nation’s democratic institutions also provide a reliable foundation for long-term investment and hope for a prosperous future.<\/span><\/span><\/span><\/li>\n<\/ul>\n
                                            \n\n\n\n
                                            \n

                                            Daily Mains Question<\/u><\/strong><\/span><\/span><\/span><\/h2>\n

                                            [Q]<\/strong><\/span><\/span><\/span> India is forecasted to become the third-largest economy by 2027. What are the key drivers of India\u2019s economic growth? What are the challenges for India?\u00a0<\/span><\/span><\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

                                            In 2022, India became the 5th largest economy in the world & will soon become the third-largest economy.<\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[28],"class_list":["post-16860","post","type-post","status-publish","format-standard","hentry","category-current-affairs","tag-indian-express"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/16860","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=16860"}],"version-history":[{"count":1,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/16860\/revisions"}],"predecessor-version":[{"id":16864,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/16860\/revisions\/16864"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=16860"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=16860"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=16860"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}