Challenges to become a Developed country

Challenges to become a Developed country

GS-3: Indian Economy

(IAS/UPPCS)

Relevant for Prelims:

Human Development Index standards, Asian Development Bank (ADB), Monetary Policy Committee of RBI, Global Credit Rating Agency.

Relevant for Mains:

Developed countries - important features, possibilities of India becoming a developed country - major bases, economic potential of India, way forward to solve the challenges, conclusion.

27/04/2024

Context:

At present, the eyes of the entire world are fixed on India's resolve to become a developed country by 2047. In fact, making India a developed country in the coming twenty-three years is a challenging goal.

  • At present there are only forty developed countries in the world, mainly industrially developed European countries. India is still a developing country. To make it a developed country, it is necessary to continuously achieve eight to nine percent annual growth rate.
  • To raise the country's current per capita income, which is around $2600, to around $12,000, India will have to overcome the following challenges: strong economic reforms, agricultural and labor reforms, higher capital expenditure, more infrastructure projects, Fiscal ideals, values of cultural and national development, more quality development in health and education sector and poverty and corruption.

Developed countries

Key Features:

  • Relatively high economic growth rate,
  • Better standard of living,
  • Higher per capita income, and
  • Good presentation on Human Development Index parameters – including basics like education, literacy and health.
  • India is still far behind on all these parameters and achieving the goal of becoming a developed country is extremely challenging.

Possibilities of India becoming a developed nation:

  • India is continuously moving ahead on the path of economic development amidst the challenges of global recession in the world. With the foundation of these foundations, India has the potential to become a developed country by 2047.

Mainstays:

The Asian Development Bank (ADB) estimates:

  • India's gross domestic product (GDP) growth rate estimate for the financial year 2024-2025 increased from 6.7 percent to 7 percent (revised estimate).
  • GDP growth projections have been raised in view of the improved outlook for public and private investment and the strong position of the services sector.

Infrastructure development and increase in investment:

  • Capital investment by the central and state governments on infrastructure development in India and increased investment by private companies, strong performance of the services sector and improving consumer confidence will boost growth in FY 2024-25.
  • According to leading global credit rating agencies, conditions in India are favorable for manufacturing, investment and exports.

Increase in exports, manufacturing and agricultural production:

  • The growth rate will also increase in the financial year 2025-26 due to improvement in export of goods and increase in manufacturing and agricultural production.

Better performance of south-west monsoon:

According to the Monetary Policy Committee of RBI-

  • The south-west monsoon is expected to be good in the year 2024, which will boost agricultural activities.

Increase in Demand and Consumption:

  • There are signs of an uptick in private consumption due to increased demand in cities and rural markets. The size of the economy will increase by increasing production through demand and consumption.

FDI:

  • Amidst the declining trend in foreign direct investment globally, India is among the major countries receiving the highest FDI in the world.

Foreign exchange reserves:

  • India's foreign exchange reserves have also increased rapidly. India has laid the foundation as a productive nation.

Free Trade Agreements (FTA):

  • India's free trade agreements (FTAs) are increasing due to the rapidly growing Indian market. NRIs are continuously sending more money abroad.

Technical Development:

  • Economic growth is gaining momentum due to space, artificial intelligence, semiconductor, energy and new technological developments by the country's scientists.

Global Suppliers:

  • In view of the increasing negativity towards China, India has emerged as a new global supplier country.

Vision for the next 5 years:

  • Special focus is being given by key government departments on outlining the development actions for the next 5 years to make India a developed nation.
  • This vision includes subjects like agriculture, infrastructure, education, employment industry, service sector, trade, startup, green energy, health, skill development, upliftment of women, poverty reduction, balanced regional development, effective justice system etc.
  • All these subjects will play an important role in India becoming a developed nation.

Global credit rating agency CRISIL:

  • According to the new report of global credit rating agency CRISIL, due to economic, financial and structural reforms, India will become a lower middle to upper middle income country by the year 2031 and the path of developed India will move forward.

India's economic potential:

  • Currently India is the fifth largest economy in the world in terms of GDP. America, China, Germany and Japan are ahead of India.
  • In the year 2024, the Indian economy may overtake the Japanese economy. This expectation has started coming from the successful chairmanship of G-20 organized by India in 2023 and the economic benefits derived from it.

Way forward to solve the challenges:

  • With the long-term strategy of development of these various sectors, India has set a target of becoming a developed economy of three trillion dollars by the year 2047. But success can be achieved only by facing the various challenges ahead to make India a developed nation.

Need for improvement in GDP and per capita income:

  • Along with continuously increasing the country's GDP, attention will have to be given to the per capita income and well-being of the common man.
  • India is ranked 134th out of 193 in the new Human Development Index (HDI) report recently released by the United Nations.
  • India has been ranked 126th among 143 countries in the World Happiness Report 2024.
  • Although there has been a huge reduction in the number of multidimensional poor in the last ten years, now a vigorous campaign will have to be carried forward to give new smiles to more than fifteen crore poor people.
  • There remains a need for agricultural, labour, land and other reforms.

Increase in outlay on research and development sector:

  • To make the role of research and innovation effective, the government will have to spend up to two percent of the total GDP on R&D. The share of private sector will also have to be increased in this.
  • Our total expenditure on research and development sector in proportion to GDP is only 0.64 percent. This is much lower than the global level of 2.71 percent. There is a need to increase it.

Need to improve basic services and social security:

  • Along with ensuring better education, better health and nutrition in the country, attention will have to be given to the higher goals of maintaining peace and maintaining security.

Women Empowerment:

  • The strategy to include more than nineteen crore women in the paid labor force in the country will have to be implemented.

Service sector:

  • To increase economic development, special focus will have to be given to the service sector.
  • To become a developed country by 2047, India will have to grow at the rate of about seven to eight percent continuously for twenty-five years.

Employment Generation:

  • A large number of new jobs will have to be created by equipping the new generation with new skills. More efforts will have to be made for startups and self-employment.

Promotion of agriculture sector:

  • The country will have to seize the opportunity to become a global leader in the agriculture sector.
  • Use of 'Lab to Land Scheme' in improved cultivation of pulses and oilseeds in the country and policy support with the participation of scientists will have to advance the Oilseeds Mission rapidly.

Conclusion:

  • India is ready for a bigger role on the global stage. India is being given special importance on global political and economic forums. The ability of the Indian economy to recover from external shocks has become the foundation of the country's sustainable development. There is no doubt that India currently has unprecedented opportunities for sustainable development. In such a situation, it can be expected that the country will definitely succeed in reaching the pinnacle of success by facing the challenges facing the goal of making a developed India by the year 2047. However, many important economic reforms have taken place in India and their positive impact is visible.

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Mains Question:

Discuss the way forward to address the challenges of India becoming a developed country.