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Problems in India’s Growth Story

GS Paper 3

Syllabus: Indian Economy and issues


SourceThe Hindu

Directions: The source article is a lead op-ed that analyses issues with the ‘India story. The article is important as questions on issues in the Indian economy and post-COVID recovery have been asked in mains.

Context: COVID-19 pandemic is receding and economies are on the path of re-growth with similar bullishness for the Indian economy but the worrisome issue is that the slowdown in India began much before the pandemic.


Indicators of structural issues:


Probable reasons:

  • Economic disruptions even in the pre-COVID era like demonetization and GST reforms.
  • Economic Survey 2020-21 also points out the debt forbearance by RBI and other regulators after the 2008 Global Financial crisis that led to NPA (Non-Performing Assets) crisis.
    • Forbearance is a form of repayment relief involving the temporary postponement of loan payments, typically for home mortgages or student loans.
  • The NPA crisis also had the cascading effect of low credit supply. The imbalance was led by the decline of credit by Public sector banks as well as the NBFC liquidity crisis.
  • Youth employability is low due to a lack of skills and vocational training in formal education.
  • Low manufacturing base: Decline of agriculture led to gross rural-to-urban migration. However, this youth could not be absorbed into higher productivity due to a lack of skill (needed in the service sector) and industrial base.
  • The investment rate in the economy fell from nearly 40% in FY14 to 32.2% in FY20.
    • The investment rate (business statistics) is the ratio of gross tangible investment to value added.


Needful measures:

  • Shift the policy focus from a few rich corporations to the larger segments of the population — small businesses, farmers, and ordinary labourers.
  • Focussing on the skilling of youth and re-skilling of employed workers to increase employment as well as productivity.
  • Capacity building and welfare measures to provide basic amenities. This is seen in schemes like PM-Gareeb Kalyan Yojana, Ayushman Bharat (PM-JAY), and PM-Awas Yojana.
  • Improving credit supply by rationalisation of public sector banks and pushing for last mile reach of formal credit via institutions like NABARD.
  • Leveraging diplomatic might to include India in global supply chains, attract FDI and long-term credit from Global Development Finance institutions (World bank, AIIB, NDB, et al)



Recent steps like the PLI (Production Linked Incentive) scheme for the manufacturing sector and various skilling programs paired with COVID-led welfare measures have the potential to turn around growth and make ‘the India story’ a reality. India’s current already outpaces most developed and developing economies and hence, it has the potential.


Insta Links

Growth Matters but Income level matters more


Mains Link

Q.“ Economic growth is a precondition for inclusive growth”, Do you agree? Analyse.


Prelims Link

With the reference to the Indian economy after the 1991 economic liberalization, consider the following statements: (UPSC 2020)

    1. Worker productivity (` per worker at 2004-05 prices) increased in urban areas while it decreased in rural areas.
    2. The percentage share of rural areas in the workforce steadily increased.
    3. In rural areas, the growth in the non-farm economy increased.
    4. The growth rate in rural employment decreased.

Which of the statements given above is/are correct?

(a) 1 and 2 only

(b) 3 and 4 only

(c) 3 only

(d) 1, 2, and 4 only

Answer: B

After the LPG reforms of 1991, it is inevitable that the rural/agriculture workforce would start shifting towards urban/non-Agri sectors. So 2 is wrong and 3 is correct. The steady transition to urbanization over the years is leading to the decline in the rural share of the population, workforce and GDP of the country. 4 is correct.