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India’s economic growth amidst global and domestic challenges
Syllabus:
GS 3:
- Indian Economy and Issues related to Planning and Growth.
- Changes in Industrial Policy And Effect on Industrial growth
Why in the News?
India’s GDP growth projection for 2024-25 is now clouded by uncertainties arising from global conflicts, climate impacts, and ongoing domestic civil unrest, which have all contributed to a less favourable economic outlook.
Global Uncertainties Impact Growth
- War Disruptions: The ongoing conflicts in Ukraine and West Asia are significantly disrupting global trade routes and economic activities, adversely affecting India’s export-import channels and supply chains.
- Climate Events: Extreme weather events, such as catastrophic floods in various regions, are severely disrupting supply chains, hindering trade flows, and threatening agricultural productivity across the globe.
- Policy Shifts: Sudden policy changes, including the recent stimulus introduced by the Chinese government, create unpredictability, complicating growth forecasts and increasing risks for Indian businesses and investors.
- US Election Uncertainty: The upcoming U.S. presidential election introduces potential changes in foreign policy, particularly towards Ukraine, which could significantly alter global economic conditions and market dynamics.
- Military Spending Impact: A significant portion of U.S. military aid to Ukraine, effectively turning into grants, raises concerns over redirection of resources and its ripple effects on international trade and military dynamics.
Climate Change and Economic Implications
- La Niña Effects: Predictions of excessive rainfall during the monsoon season pose severe risks to crop yields and agricultural production, jeopardizing India’s food security and economic stability.
- Trump’s Climate Policies: Should Donald Trump return to office, his previous withdrawal from international climate accords may hinder global cooperation, adversely affecting trade relations and climate-focused investments.
- Harris’s Stance on Climate: Conversely, Kamala Harris’s potential election could revitalize global climate action, fostering enhanced international cooperation on environmental issues that could benefit India’s own climate strategies.
- Domestic Climate Concerns: India’s lack of control over global climate uncertainties underscores the need for robust domestic strategies to mitigate adverse impacts on agriculture and overall infrastructure resilience.
- Sustainability Challenges: Frequent extreme climate events not only threaten the stability of economic growth but also pose long-term challenges for sustainable development and infrastructure integrity across the nation.
Domestic Civil Unrest and Growth Concerns
- Manipur Unrest: The persistent civil unrest in Manipur has caused instability and heightened tensions, detracting from economic activities and creating a negative perception of governance within the region.
- Public Safety Protests: Nationwide protests regarding public safety, especially concerning healthcare workers, underscore critical governance failures and reflect the populace’s growing dissatisfaction with safety measures and public services.
- Urban Safety Needs: The urgent need for improved urban safety mechanisms calls for innovative technological solutions, such as real-time alerts to law enforcement, ensuring public confidence in safety during urban engagements.
- Labor Market Issues: The reluctance of the private sector to invest stems from skilled labour shortages compounded by ongoing civil unrest, highlighting the urgent need for structural changes in the labor market.
- Integrated Job Market Absence: The absence of a cohesive national labour market in India stymies workforce mobility, limiting economic growth and exacerbating disparities in job opportunities and skills utilization.
Challenges in Skill Development
- Mismatch in Supply-Demand: The significant disparity between job openings and qualified candidates manifests in job listings attracting overqualified applicants, indicating systemic issues in education and workforce training programs.
- Skilled Labour Shortage: The persistent lack of adequately skilled labour continues to impede private-sector investment decisions, underscoring a pressing need for enhanced vocational training and skill development initiatives.
- Job Search Radius: Job seekers often confine their searches to local areas due to safety concerns, limiting access to potential employment opportunities and perpetuating regional skill mismatches in the job market.
- Language Barriers: Language differences between regions prevent skilled workers from seeking opportunities outside their comfort zones, restricting their mobility and further complicating the overall job market landscape.
- Public Sector Role: The government must actively create integrated employment platforms and provide skill development programs to bridge the gap between job seekers and available opportunities across different regions.
Infrastructure Woes Impacting Growth
- Quality Concerns: Poor quality in public infrastructure, such as airports and exhibition centres, raises significant concerns among investors about the reliability and sustainability of economic growth prospects in India.
- Capital Expenditure: Although government capital investments have propelled construction sector growth, the overarching quality and longevity of these projects are crucial for ensuring foundational support for India’s economic ambitions.
- Construction Growth: Despite the construction sector showing impressive growth figures, concerns over the durability and quality of the built infrastructure could undermine future economic stability and investor confidence.
- Safety Failures: Instances of structural failures, such as the roof collapse at Delhi airport, highlight critical shortcomings in infrastructure maintenance and safety, necessitating urgent improvements in quality control and oversight.
- Long-Term Economic Growth: Ensuring that public infrastructure is both robust and reliable is vital for sustaining economic growth, as these structures provide the necessary framework for future developmental initiatives.
Way Forward
- Enhance Climate Resilience: Implement comprehensive climate adaptation strategies to mitigate the adverse impacts of extreme weather events on agriculture and infrastructure, ensuring food security and economic stability.
- Strengthen Domestic Policies: Formulate and enforce robust domestic policies that address civil unrest, enhance public safety, and promote social cohesion, thereby restoring confidence in governance and economic activities.
- Foster Skill Development: Establish targeted skill development programs and vocational training initiatives to bridge the gap between available job opportunities and the skills of the workforce, enhancing employability.
- Invest in Infrastructure Quality: Prioritize investments in high-quality infrastructure projects that meet safety and durability standards, thereby supporting sustainable economic growth and improving public confidence in government initiatives.
- Enhance International Cooperation: Actively engage in international forums and collaborations to address global challenges, such as climate change and trade disruptions, ensuring that India remains a significant player on the global stage.
- Diversify Trade Partnerships: Develop diversified trade relationships with various countries to reduce dependence on specific markets, thereby enhancing resilience against global uncertainties and improving trade security.
Conclusion
India’s economic growth prospects for 2024-25 face significant challenges stemming from global conflicts, climate variability, and domestic unrest. Addressing these multifaceted issues will require comprehensive policy interventions, infrastructure investments, and skill development initiatives to ensure long-term economic stability.
Source: The Mint
Mains Practice Question
Evaluate the challenges facing India’s economic growth projections for 2024-25 in light of global conflicts, climate uncertainties, and domestic civil unrest. What strategies should India adopt to navigate these challenges for sustained growth?
