Paper: GS – III, Subject: Indian Economy, Topic: Growth and Development, Issue: India’s Economic Growth.
Context:
The current economic standing of India in comparison to other major economies, particularly Japan.
- It delves into the complexities of GDP calculations, the significance of purchasing power parity (PPP), and the implications for the average Indian citizen.
- The discussion highlights the contrasting perspectives on India’s economic growth and the realities of per capita income.
India’s Economy Size Debate:
Key Takeaways:
Overview of India’s Economic Position:
Importance of Purchasing Power:
Per Capita Income Discrepancies:
Key Determinants of India’s Economic Growth:
- Expanding Domestic Consumption: India’s economic growth is largely fueled by private consumption, particularly in rural areas.
- Also, the urbanization and lifestyle shifts have led to an increase in consumption-led growth.
- India’s urban population is expected to touch 600 million by 2030.
- The demographic dividend is a unique edge—India’s median age is just 29 years, offering a productive workforce for the coming decades.
- Infrastructure Development & Digital Transformation: India has invested heavily in modernizing infrastructure, including transportation, energy, and digital connectivity.
- For example: India’s Digital Public Infrastructure (DPI), emergence of India as a global startup hub & boost in the IT sector enhancing innovative driven growth.
- Manufacturing & Services Sector Growth: India’s manufacturing sector has seen significant growth due to initiatives like Make in India and Production-Linked Incentive (PLI) schemes.
- Additionally, the services sector, particularly IT and financial services, continues to be a major contributor to GDP.
- External and Global Realignment: Strategic initiatives like “China Plus One” and Supply Chain Resilience Initiative (SCRI) are leading to increased FDI inflows into India.
- Global firms are diversifying their manufacturing bases, turning to India as an alternative to China amid geopolitical tensions
- For example: Apple has investors in India for manufacturing units.
Reform-Driven Growth: Introduction of Goods and Services Tax (GST) has created a unified domestic market, Insolvency and Bankruptcy Code (IBC) has improved the ease of doing business, Corporate tax cuts & initiatives like PM Gati Shakti, National Infrastructure Pipeline (NIP), and Atmanirbhar Bharat are boosting capital formation.
Conclusion:
- Claims about India’s economic ranking depend on whether you use nominal or PPP figures.
- While India’s aggregate GDP is rising, individual prosperity remains low compared to developed nations.
- Policymakers and citizens must focus not just on rankings but also on improving per capita incomes, living standards, and social infrastructure.
https://indianexpress.com/article/explained/explained-economics/india-third-largest-economy-10033187
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