Reforms Needed for India to Become a Developed Country
Kartavya Desk Staff
Syllabus: Indian Economy
- •Source: HT*
Context: India aims to become a developed country by 2047. This will require a 7.5% annual growth in per capita income and a 9% GDP growth. The article highlights the reforms needed.
What is a developed country?
A developed country is characterized by a mature and advanced economy with high levels of industrialization, technological infrastructure, and overall societal well-being. These countries are distinguished from developing nations, which are still progressing economically and socially. India, despite being the world’s fifth-largest economy with a GDP of 3.42 lakh crores USD, is currently classified as a developing nation.
Key characteristics of a developed country:
Economic Factors | Social and Human Development Factors | Technological and Innovation
High per capita income (USD 12,000 – 25,000+) | Countries with an HDI score above 0.8 are considered developed | Advanced technological infrastructure
Diversified industrial and service sectors | High levels of education and literacy and Access to quality healthcare and social services | Strong emphasis on R&D
Robust infrastructure (transport, communication, utilities) | Low infant mortality and high life expectancy | High levels of innovation and productivity
Stable and efficient financial markets | Robust legal and political institutions with democratic governance |
Where does India Stand?
India lags behind both developed and some developing countries. While it is the fifth largest economy by GDP, its per capita income is significantly lower than China’s and the UK’s.
India’s achievement since Independence:
Area | Achievements
GDP | India’s GDP rose from Rs 2.79 lakh crore in 1950-51 to an estimated Rs about 280 lakh crore currently.
Forex | India’s foreign exchange reserves increased from Rs 911 crore in 1950-51 to over $650 billion USD currently. India has the sixth-largest forex reserves in the world.
Food Production | Foodgrain production has grown from 50.8 million tonnes in 1950-51 to over 329 million tonnes currently.
Literacy Rate | The literacy rate improved from 18.3% in 1951 to 78%. Female literacy rate increased from 8.9% to over 70%.
Major Challenges with India’s Goal of a Developed Economy
Category | Issues | Details
Economic Growth | Jobless Growth | Despite 7.8% economic growth in FY 2023–24, job creation remains insufficient.
Agricultural Employment | 44% of the workforce is in low-productivity agriculture, contributing only 15% to GDP.
Job Creation Needs | 115 million jobs are needed by 2030 to meet the rising workforce.
Education and Skills | Poverty-Education-Skill Trap | Poor primary and secondary education limits cognitive development and higher education benefits.
Skills Shortage | 150 million skilled workers are needed; nearly half of graduates are unemployable (India Skills Report 2021).
Education System | Not adapting quickly enough to industry demands despite the National Education Policy.
Public Debt | High Public Debt | Public debt at 81.9% of GDP raises fiscal sustainability concerns, crowding out private investment.
Income Inequality | Income Disparity | 22.6% of national income went to the top 1% in 2022-23, hindering inclusive growth.
HDI Ranking | India’s HDI score in 2022 was 0.644, placing it at 134th out of 192 countries.
Rural-Urban Divide | Unbalanced Development | Urban centres grow economically, while rural areas suffer from poverty and lack of infrastructure.
Potential Social Unrest | Neglecting rural development could lead to social unrest.
Climate Change | Vulnerabilities | Environmental degradation impacts health and undermines growth sustainability.
Economic Risk | Up to 4.5% of India’s GDP could be at risk by 2030 due to climate change (RBI).
Infrastructure | Deficit and Financing Challenges | The infrastructure gap in transportation, power, and urban sectors is estimated at USD 1.5 trillion (World Bank).
Project Delays | Issues with land acquisition, environmental clearances, and regulatory hurdles cause delays and cost overruns.
Major Advantages of India (Towards Becoming a Developed Economy)
• Services Sector: India’s services sector accounts for over 50% of GDP, offering high-value jobs and attracting foreign investment.
• Demographic Dividend: India’s young population (median age of 28.2 years in 2023) presents a vast human capital pool for economic growth if properly skilled and employed.
• Government Initiatives: E.g., The Pradhan Mantri Gati Shakti National Master Plan drive infrastructure development, enhancing efficiency and economic activity.
• Digital Transformation and Startup Ecosystem: Digital India Initiative and Unified Payment Interface democratization drive digital revolution, with 8% year-on-year internet penetration growth in 2023.
• Economic Growth: Despite global uncertainties, India’s domestic demand shows resilience, with an expected over 7% real GDP growth in 2024-25.
What should be done?
• Sound Economy: Focus on sustained fiscal deficit reduction, targeting 4.5% of GDP by 2025-26.
• Skill Development for Demographic Dividend: Invest in vocational education and industry-aligned skills. Tier II cities should be focused as these new cities have the potential to generate 70% of the country’s new jobs and GDP over the next 20 years.
• Tier II cities should be focused as these new cities have the potential to generate 70% of the country’s new jobs and GDP over the next 20 years.
• Rural Development and Infrastructure: Prioritize rural infrastructure and promote agro-processing.
• Affordable Healthcare and Prevention: Increase healthcare spending and promote preventive measures.
• Innovative Infrastructure Financing: Explore new financing models (e.g. Crowdfunding) and public-private partnerships.
• Technology and Innovation Promotion: Boost R&D investment and establish innovation ecosystems.
• Blue Economy Harnessing: Develop sustainable maritime activities and coastal infrastructure.
• Formalizing Informal Sector: Implement portable social security and support startup hubs.
• Green Collar Jobs Creation: Train workforce for green sectors and incentivize green employment.
• Enhance revenue productivity of the tax system
Insta Links:
• Reaping India’s demographic dividend
Mains Link:
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 the recent changes in Industrial Policy capable of increasing the industrial growth rate? (UPSC 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? (UPSC 2014)
Prelims Links:
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)
Increase in absolute and per capita real GNP does not connote a higher level of economic development if (UPSC 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)