India’s journey to becoming a developed economy is a tale of resilience, innovation, and transformative growth. Emerging from the shadows of colonial rule in 1947, India has since charted a path marked by rapid industrialization, technological advancements, and substantial economic reforms. Despite grappling with challenges such as poverty, infrastructural deficits, and social inequalities, India has managed to position itself as a burgeoning global power. The liberalization policies initiated in the 1990s catalyzed economic dynamism, leading to a surge in foreign investments, an expanding middle class, and a robust service sector, particularly in information technology. As India continues to navigate the complexities of globalization and domestic development, its aspiration to achieve developed nation status reflects not just an economic ambition, but a comprehensive vision
Tags: GS Paper – 3, Economy- Growth & Development
Context:
India’s journey to becoming a developed nation requires addressing fiscal and structural challenges, fostering inclusive growth, and strengthening the export sector.
India aims to become a developed nation by 2047, requiring a significant rise in per capita income from USD 2,600 to USD 10,205.
This goal demands a 7.5% annual per capita income growth and a 9% GDP growth rate over the next 25 years.
What about the Developed Country?
A developed country refers to a nation with a mature and advanced economy, characterised by high levels of industrialization, technological infrastructure, and overall societal well-being.
The term “developed” distinguishes these countries from “developing” or “underdeveloped” nations, which are still undergoing economic and social growth.
India, currently classified as a developing nation, is the world’s fifth-largest economy with a GDP of 3.42 trillion USD.
Key Characteristics of Developed Countries:
Economic Factors:
High per capita income (typically above USD 12,000 to USD 25,000 or more)
Diversified and advanced industrial and service sectors
Robust infrastructure, including transportation, communication, and utilities
Stable and efficient financial markets
Social and Human Development Factors:
High levels of education and literacy
Access to quality healthcare and social services
Low infant mortality and high life expectancy rates
Robust legal and political institutions, with democratic governance
Technological and Innovation Factors:
Advanced technological infrastructure and capabilities
Strong emphasis on research and development (R&D)
High levels of innovation and productivity
Measurements and Indicators:
Per Capita Income:
One of the primary indicators used to determine a country’s development status
Calculated by dividing the Gross Domestic Product (GDP) by the total population
Human Development Index (HDI):
A composite index used by the United Nations to measure a country’s overall well-being
Factors include life expectancy, education levels, and standard of living
Countries with an HDI score above 0.8 are generally considered developed
Examples of Developed Countries:
According to the International Monetary Fund (IMF), some developed countries include the United States, Canada, Japan, Australia, and New Zealand.
Other examples include Singapore, South Korea, and Hong Kong in Asia.
The Major Growth Drivers Propelling India Towards a Developed Economy:
Rise of the Services Sector:
Significant Contribution to GDP: India’s services sector contributes over 50% to the GDP, offering high-value jobs and attracting foreign investment.
Global Leadership in IT and BPO: Industries like IT and Business Process Outsourcing (BPO) have made India a global leader, providing services to international clients and integrating the economy globally.
Demographic Dividend
Young Population: With a median age of 28.2 years (2023), India possesses a large pool of human capital that can drive economic growth if properly skilled and employed.
Government Initiatives for Infrastructure Development
Pradhan Mantri Gati Shakti National Master Plan: The Indian government’s initiative aims to boost efficiency and economic activity across sectors through infrastructure development projects.
Digital Transformation and Startup Ecosystem
Digital India Initiative: India is undergoing a digital revolution with increasing internet penetration, facilitated by initiatives like the Unified Payment Interface.
Thriving Startup Ecosystem: The country hosts a growing number of startups and research institutions, fostering innovation and creating new growth opportunities across various sectors.
Economic Resilience Despite Global Slowdown
Relative Domestic Demand Resilience: Despite global economic uncertainties and geopolitical tensions, India’s domestic demand has shown resilience, with the RBI forecasting a 7% real GDP growth in 2024-25.
Innovation and Entrepreneurship
Cultural Embrace of Innovation: India is nurturing a culture of innovation and entrepreneurship, evidenced by the proliferation of startups and research institutions focused on developing cutting-edge technologies and solutions.
The Major Roadblocks to India’s Goal of Developed Economy:
Jobless Growth:
Despite India’s impressive economic growth of 7.8% in FY 2023–24, it has not translated into sufficient job creation.
A significant portion of the workforce remains entrenched in low-productivity agriculture, which contributes nearly 15% to GDP but employs 44% of the workforce.
India needs to generate 115 million jobs by 2030 to accommodate its expanding workforce.
Poverty-Education-Skill Trap:
Poor quality primary and secondary education in India limits cognitive development and diminishes the potential benefits of higher education.
This results in a workforce ill-prepared for higher-skilled jobs, contributing to a shortage of 150 million skilled workers.
Despite the National Education Policy, the education system in India is slow to adapt to evolving industry demands, leaving many graduates without the specific skills sought by employers.
High Public Debt:
India’s public debt stands at 81.9% of GDP, raising concerns about fiscal sustainability.
The high debt burden necessitates high-interest rates, which crowd out private investment and impede economic growth.
Vast Income Inequality:
India exhibits high income inequality, with a substantial portion of the population living in poverty.
In 2022-23, the top 1% of income earners captured 22.6% of national income, exacerbating income disparities and hindering inclusive growth and access to basic services for many.
Rural-Urban Divide and Unbalanced Development:
While India’s urban centres have experienced economic growth, rural areas face persistent poverty, inadequate infrastructure, and limited access to basic services.
Neglecting rural development deepens social disparities and poses risks of social unrest, which could impede overall progress.
Climate Change Vulnerabilities:
Rapid industrialization and urbanisation in India have led to environmental degradation, including air and water pollution, deforestation, and biodiversity loss.
These environmental impacts not only affect public health and quality of life but also undermine the sustainability of economic growth.
Failure to prioritise adaptation and mitigation measures could jeopardise India’s development trajectory, with up to 4.5% of GDP at risk by 2030, according to the Reserve Bank of India.
Infrastructure Deficit and Financing Challenges:
India faces a substantial infrastructure gap, particularly in transportation, power, and urban infrastructure, which acts as a bottleneck to economic development.
The infrastructure deficit is estimated at around USD 1.5 trillion, complicating efforts to spur economic growth.
Challenges such as land acquisition, environmental clearances, and regulatory hurdles further delay infrastructure projects and contribute to cost overruns.
Measures can India Adopt to Accelerate Progression Towards a Developed Economy:
Leveraging Demographic Dividend through Skill Development:
India must heavily invest in vocational education, skill development programs, and apprenticeships to build a globally competitive workforce.
Collaborating with industry to design curriculum aligned with market demands and emerging technologies such as AI, robotics, and renewable energy, drawing lessons from models like Norway’s.
Balanced Regional Development and Rural Transformation:
Prioritise investment in rural infrastructure, including roads, electrification, healthcare, and digital connectivity, to bridge the rural-urban divide.
Incentivize agro-processing units and manufacturing hubs in rural areas to create non-farm job opportunities.
Promote sustainable agriculture practices, precision farming, and access to credit and insurance to enhance rural incomes and food security.
Preventive and Affordable Healthcare:
Increase public healthcare spending to at least 2.5% of GDP, as recommended by the National Health Policy 2017, to strengthen the healthcare system and improve Human Development Index indicators.
Promote preventive healthcare through awareness campaigns, early detection, and lifestyle interventions.
Utilise digital technologies like telemedicine to enhance healthcare access in remote areas and reduce costs.
Innovative Infrastructure Financing and Public-Private Partnerships:
Explore innovative financing models such as asset monetization and securitization of infrastructure assets, along with tapping into global capital markets.
Promote infrastructure investment trusts (InvITs) and real estate investment trusts (REITs) to attract long-term institutional investors for infrastructure projects.
Fostering Innovation and Technological Advancement:
Increase R&D investment to 2% of GDP, in line with the Science, Technology, and Innovation Policy 2020 targets.
Establish clean technology parks, incubation centres, and circular-economy zones to attract global technology leaders and foster innovation.
Unlocking the Potential of the Blue Economy:
Harness India’s coastal resources through sustainable maritime activities like coastal shipping, marine tourism, offshore wind energy, and deep-sea mining.
Develop infrastructure for ship repair, logistics hubs, and coastal economic zones to stimulate trade, employment, and economic growth.
Promote marine biotechnology and value-added marine products to meet global demand.
Formalising Informal Sector and Promoting Startup Hubs:
Implement a portable social security system for informal sector workers to incentivize formalisation and job security.
Establish well-funded startup hubs in Tier-2 and Tier-3 cities to foster disruptive innovation beyond major metros.
Green Collar Jobs Revolution:
Implement green jobs training programs in partnership with industries to prepare the workforce for roles in renewable energy, waste management, and sustainable infrastructure.
Provide tax incentives and subsidies to companies hiring and training workers in green sectors, promoting job creation and sustainable development.
| UPSC Civil Services Examination, Previous Year Questions (PYQs) Prelims Q:1 In the ‘Index of Eight Core Industries’, which one of the following is given the highest weight? (2015) (a) Coal production (b) Electricity generation (c) Fertiliser production (d) Steel production Ans: (b) Q:2 Increase in absolute and per capita real GNP do not connote a higher level of economic development, if: (2018) (a) Industrial output fails to keep pace with agricultural output. (b) Agricultural output fails to keep pace with industrial output. (c) Poverty and unemployment increase. (d) Imports grow faster than exports. Ans: (c) Q:3 In a given year in India, official poverty lines are higher in some States than in others because: (2019) (a) Poverty rates vary from State to State (b) Price levels vary from State to State (c) Gross State Product varies from State to State (d) Quality of public distribution varies from State to State Ans: (b) Mains Q.1 “Industrial growth rate has lagged behind in the overall growth of Gross-Domestic-Product(GDP) in the post-reform period” Give reasons. How far are the recent changes in Industrial Policy capable of increasing the industrial growth rate? (2017) Q.2 Normally countries shift from agriculture to industry and then later to services, but India shifted directly from agriculture to services. What are the reasons for the huge growth of services vis-a-vis the industry in the country? Can India become a developed country without a strong industrial base? (2014) |
Source: HT
FAQs
1. What are the major milestones in India’s economic development since independence?
Answer: Since gaining independence in 1947, India has undergone significant transformations to achieve economic development. Major milestones include:
- 1951-1965: Introduction of the Five-Year Plans focusing on industrialization and self-sufficiency.
- 1969-1974: Green Revolution, which significantly increased agricultural productivity.
- 1991: Economic liberalization, marked by the shift from a closed economy to one that is more market-oriented, promoting foreign investment and private sector growth.
- 2000s: Rapid growth in the IT and services sectors, positioning India as a global technology hub.
- 2014-Present: Implementation of key reforms like the Goods and Services Tax (GST) and the Make in India initiative to boost manufacturing and economic growth.
2. How has economic liberalization in 1991 impacted India’s growth?
Answer: The economic liberalization of 1991 was a pivotal moment for India, leading to:
- Higher Growth Rates: The average GDP growth rate increased from around 3-4% before 1991 to 6-8% in the subsequent decades.
- Foreign Investment: Attracted significant foreign direct investment (FDI), boosting infrastructure and technology transfer.
- Private Sector Expansion: Reduced government control allowed for the private sector to flourish, driving innovation and efficiency.
- Global Integration: India became more integrated into the global economy, enhancing trade and economic opportunities.
3. What challenges does India face in becoming a developed economy?
Answer: Despite notable progress, India faces several challenges on its path to becoming a developed economy:
- Infrastructure Deficits: Inadequate infrastructure hampers economic activities and growth.
- Income Inequality: Significant disparities in income distribution, with a large portion of the population still living in poverty.
- Education and Skills: Need for improvement in the education system and vocational training to meet the demands of a modern economy.
- Healthcare: Access to quality healthcare remains a challenge for many, impacting overall productivity.
- Governance and Corruption: Bureaucratic inefficiencies and corruption can impede economic progress and investor confidence.
4. What role does the IT sector play in India’s economic development?
Answer: The IT sector is a cornerstone of India’s economic development, contributing significantly in several ways:
- Employment: Provides millions of jobs, both directly and indirectly, supporting a large segment of the population.
- Export Earnings: IT services and software exports are major sources of foreign exchange earnings.
- Innovation and Entrepreneurship: Fosters a culture of innovation, with many tech startups emerging, especially in cities like Bangalore and Hyderabad.
- Global Competitiveness: Enhances India’s position in the global economy, attracting international business and investment.
5. What measures is the Indian government taking to sustain long-term economic growth?
Answer: The Indian government is implementing various measures to sustain long-term economic growth, including:
- Economic Reforms: Ongoing reforms such as GST, Insolvency and Bankruptcy Code (IBC), and labor law reforms to improve the business environment.
- Digital India: Promoting digital infrastructure to boost connectivity and e-governance.
- Make in India: Encouraging domestic manufacturing to reduce dependency on imports and create jobs.
- Skill Development: Initiatives like Skill India to enhance the skill set of the workforce.
- Infrastructure Development: Large-scale investments in roads, railways, ports, and urban infrastructure to facilitate economic activities.
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