Despite its economic size, India’s developing status reveals challenges like inequality, youth unemployment and a vast informal sector
Prime Minister Modi recently visited the US to strengthen bilateral ties and committed to Making India Great Again (MIGA), in consonance with Donald Trump’s dream of making America greater again (MAGA).
Although India is the world’s fifth-largest economy with a GDP of approximately US$ 4.27 trillion, it is still classified as a developing nation. A developing country is technically a country where the Gross National Income per capita is $11,905 or less, with India’s per capita being nearly half of it at $6,951. We rank 134 out of 193 countries in terms of the Human Development Index (HDI), below our neighbouring countries China at 75, Sri Lanka at 78, and even Bhutan and Bangladesh at 125 and 128 respectively (UN Development Report 2022-23).
With an HDI score of 0.644, India is categorised as ‘medium human development’. However, there has been improvement across all HDI indicators–life expectancy, education, and Gross National Income (GNI) per capita from last year. Nevertheless, we cannot conceit the improvement in the HDI alone, as Global Multidimensional Poverty Index 2024, places India at the top of the 5 countries with the most people in poverty with 234 million people in the bracket. In sharp contrast to this, it ranks 3rd in the number of billionaires (Forbes, 2023), indicating glaring disparities in income inequalities. Another morbid aspect is high youth unemployment which accounts for almost 83 per cent of the total unemployment in India. Even worrisome is the share of youngsters with secondary or higher education in the total unemployed, which has almost doubled from 35.2 per cent in 2000 to 65.7 per cent in 2022 (Indian Employment Report, 2024). The unemployment problem is further aggravated as about 90 per cent of the labour force works in the unorganised sector grappling with the issues of irregular work, income, social security benefits and working conditions. The policymakers are profoundly designing policies to boost the economy. Recently the monetary policy was eased, the repo rate dropped to push investment, and the government announced tax concessions to encourage consumption, both expected to accelerate output and income with a multiplier effect.
This will probably counter the Blume Venture report, that nearly 100 crore Indians, 90 per cent of the country’s population, lack discretionary spending power to purchase goods or services.
With a desired GDP growth rate of at least 7 per cent, these measures will likely create a transitionary optimistic mood for the economy, but cannot sustain growth forever. The World Development Report, 2024, found the developing economies in the “middle-income trap,” and emphasised the 3 I’s, Investment, Infusion (of global technologies) and Innovation as three drivers of economic growth and expanding the production frontier.
The government thereby needs to adopt a multifaceted approach to overcome challenges in covering potential gaps in production. It needs to work pragmatically towards education reforms, higher investment for skill development, human capital and creating regular employment opportunities. Moreover, efforts to promote medium and small enterprises, labour-intensive industries, start-ups, Make in India mission, need to be further strengthened to ensure an easy path to Make India Better (MIB) before MIGA.
(The writer is an assistant professor at Sri Guru Gobind Singh College of Commerce, Delhi University. Views are personal)
