Indian economy continues to grow despite facing hurdles like inflation and unemployment

In his second term, Prime Minister Modi had given a call to make India a ‘five trillion economy.’ Though the dream is still to be realised, it gave a sense of direction and hope to India’s entrepreneurs and stakeholders. But every goal has a meandering path one must negotiate to reach it. Indeed, as the world’s fifth-largest economy, India continues to capture the attention of global investors and economists alike. It is a key player in the global economic landscape. However, several impediments need to be done away with to reach the goal. Recently, Shaktikanta Das, the Governor of the Reserve Bank of India (RBI), expressed confidence in India achieving a 7.2 per cent GDP growth rate for the current fiscal year. This assertion is significant from the policy point of view and needs scrutiny of the factors contributing to this optimistic outlook. No doubt, India’s economy has shown resilience in the face of various challenges, including the aftermath of the COVID-19 pandemic and global geopolitical tensions. Several economic indicators reveal a mixed yet promising picture. In recent years, the Indian economy has been touted as the fastest-growing economy in the world. The Indian economy has demonstrated robust growth in recent years, recovering from the pandemic. Its GDP grew by 7.8 per cent in the first quarter of FY 2023-24, indicating a strong economic momentum.

But on the downside, price rise and Inflation are a big cause of concern. Right now, the Consumer Price Index (CPI) inflation stood at 4.6 per cent in May 2024, within the RBI's comfort zone of 4%±2% which could be counted as a positive indication for the growth. Another grey area of the economy has been unemployment. The unemployment rate remains a critical issue, with urban unemployment at 7.8 per cent and rural unemployment at 7.4 per cent in June 2024. Despite improvements, job creation in key sectors like manufacturing and services remains low. Jobs are essential for sustaining growth which is a red flag for growth right now. Sincere efforts need to be made to tackle this menace as it can mitigate all the positive indicators. On positive side,  India continues to attract significant FDI, which totalled $55.3 billion in the first half of 2024. Besides, the growth of the digital economy has had a good impact on the ease of doing business. India's digital economy is booming, with a projected value of $1 trillion by 2025. Not to forget the contribution of  India’s young population which presents a significant demographic advantage. With over 50 per cent of its population under the age of 25, India has a large and dynamic workforce that can drive consumption and innovation. The confidence expressed by RBI Governor Shaktikanta Das in achieving a 7.2 per cent growth rate this year highlights the resilience and potential of the Indian economy. However, addressing the challenges of inflation, global economic uncertainties, and climate change will be crucial in ensuring sustainable and inclusive growth.