Manya Rathore
Research expert covering India
State of the Indian economy - statistics & facts
As the world’s largest democracy, with the largest population and a GDP valued at 3.5 trillion U.S. dollars, India’s economic prowess has been closely scrutinized by the world. The South Asian giant now ranks as the fifth largest economy worldwide with a global GDP contribution projected to reach over eight percent. However, the country continues to be labeled as an “emerging economy” alongside Asia’s other key economic power, China. This can be attributed to factors underlying India’s seemingly impressive GDP performance.
Over the years, various government-led initiatives such as the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and the Pradhan Mantri Garib Kalyan Yojana (PMGKY) have been implemented to help uplift households in rural India, where those living below the poverty line were mostly concentrated. According to government sources, over 200 million people escaped multidimensional poverty in the last nine years. Despite that, economic inequalities remain persistent in a country where the top one percent held more than 40 percent of the nation’s wealth. The most underrated risk to the Indian economy, however, is climate change. According to the Reserve Bank of India, the country risks losing 4.5 percent of GDP by 2030 due to extreme weather events.
However, tapping the demographic dividend of the young working-age population through labor reforms addressing unemployment will be a game-changer for the Indian economy. Investments in education, health and care, children, and increasing the female workforce participation in the economy will help the country convert the demographic pressures into dividends.
Challenges for India’s leviathan economy
Widespread poverty and unemployment coupled with increasing population are key challenges for India. As opposed to its “developed”, service-oriented counterparts, India is primarily an agriculture-based economy. Although the services sector contributes largely to the country’s GDP, most of the workforce is employed within the agriculture sector. Data shows that joblessness is higher among the educated population. Skilling and capacity-building programs operated by the government have focused on improving the employability of the country’s workforce. However, a sharp mismatch remains between the labor force’s skills and the jobs created in the market.Over the years, various government-led initiatives such as the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and the Pradhan Mantri Garib Kalyan Yojana (PMGKY) have been implemented to help uplift households in rural India, where those living below the poverty line were mostly concentrated. According to government sources, over 200 million people escaped multidimensional poverty in the last nine years. Despite that, economic inequalities remain persistent in a country where the top one percent held more than 40 percent of the nation’s wealth. The most underrated risk to the Indian economy, however, is climate change. According to the Reserve Bank of India, the country risks losing 4.5 percent of GDP by 2030 due to extreme weather events.
Facing the headwinds
Despite the challenges, India’s growth projections by the IMF estimate that the Indian economy will expand by close to 7 percent in 2024, faster than other large economies worldwide. This is mainly driven by strong public investment and resilient private consumption. As one of the largest unicorn bases globally, India is also a major repository of foreign and domestic investments, one of the key growth drivers in the future. While micro-enterprises account for 95 percent of total businesses in the country, India is home to the world’s leading conglomerates such as Reliance Industries Limited and the Tata Group, vested in several important economic sectors. Schemes such as Make in India and Startup India were initiated to bolster the ease of doing business for the growing number of business enterprises in the country.However, tapping the demographic dividend of the young working-age population through labor reforms addressing unemployment will be a game-changer for the Indian economy. Investments in education, health and care, children, and increasing the female workforce participation in the economy will help the country convert the demographic pressures into dividends.
